Text: S.Hrg. 113-371 — A MORE EFFICIENT AND EFFECTIVE GOVERNMENT: IMPROVING THE REGULATORY FRAMEWORK

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[Senate Hearing 113-371]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-371

 
  A MORE EFFICIENT AND EFFECTIVE GOVERNMENT: IMPROVING THE REGULATORY 
                               FRAMEWORK

=======================================================================



                                HEARING

                               before the

                   SUBCOMMITTEE ON THE EFFICIENCY AND

      EFFECTIVENESS OF FEDERAL PROGRAMS AND THE FEDERAL WORKFORCE

                                 of the

                              COMMITTEE ON

                         HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE


                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2014

                               __________

         Available via the World Wide Web: http://www.fdsys.gov

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs





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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEIKAMP, North Dakota

                  Gabrielle A. Batkin, Staff Director
               John P. Kilvington, Deputy Staff Director
               Keith B. Ashdown, Minority Staff Director
                     Laura W. Kilbride, Chief Clerk
                     Lauren Corcoran, Hearing Clerk


 SUBCOMMITTEE ON THE EFFICIENCY AND EFFECTIVENESS OF FEDERAL PROGRAMS 
                       AND THE FEDERAL WORKFORCE

                     JON TESTER, Montana, Chairman
MARK L. PRYOR, Arkansas              ROB PORTMAN, Ohio
CLAIRE McCASKILL, Missouri           RON JOHNSON, Wisconsin
MARK BEGICH, Alaska                  RAND PAUL, Kentucky
TAMMY BALDWIN, Wisconsin             MICHAEL B. ENZI, Wyoming
HEIDI HEITKAMP, North Dakota

                 Tony McClain, Majority Staff Director
                 Brent Bombach, Minority Staff Director
                       Kelsey Stroud, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Tester...............................................     1
    Senator Portman..............................................    10
    Senator Pryor................................................    11

                               WITNESSES
                        Tuesday, March 11, 2014

Hon. Angus S. King, Jr., A United States Senator from the State 
  of Maine.......................................................     3
Hon. Howard Shelanski, Administrator, Office of Information and 
  Regulatory Affairs, Office of Management and Budget............    13
Hon. C. Boyden Gray, Founding Partner, Boyden Gray & Associates, 
  PLLC...........................................................    23
Katherine McFate, President, Center for Effective Government.....    25
Michelle Sager, Director, Strategic Issues, U.S. Government 
  Accountability Office..........................................    26

                     Alphabetical List of Witnesses

Gray, Hon. C. Boyden:
    Testimony....................................................    23
    Prepared statement with attachment...........................    42
King, Hon. Angus S. Jr.:
    Testimony....................................................     3
    Prepared statement...........................................    33
McFate, Katherine:
    Testimony....................................................    25
    Prepared statement...........................................    94
Sager, Michelle:
    Testimony....................................................    26
    Prepared statement...........................................   104
Shelanski, Hon. Howard:
    Testimony....................................................    13
    Prepared statement...........................................    39

                                APPENDIX

Letter submitted by Ms. McFate...................................   123
Statement for the Record submitted by the Business Roundtable....   125
Responses to post-hearing questions for the Record:
    Mr. Shelanski................................................   138
    Ms. McFate...................................................   156
    Ms. Sager....................................................   158

                     A MORE EFFICIENT AND EFFECTIVE


             GOVERNMENT: IMPROVING THE REGULATORY FRAMEWORK

                              ----------                              


                        TUESDAY, MARCH 11, 2014

                                 U.S. Senate,      
        Subcommittee on the Efficiency and Effectiveness of
                Federal Programs and the Federal Workforce,
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:32 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Jon Tester, 
Chairman of the Subcommittee, presiding.
    Present: Senators Tester, Pryor, McCaskill, and Portman.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Good afternoon, and I will call this 
hearing of the Subcommittee on Efficiency and Effectiveness of 
Federal Programs and the Federal Workforce to order.
    Senator Portman, the Ranking Member, will be here shortly. 
He is en route. I thought I would start with my opening 
statement, and then hopefully he will be here by the time I 
finish it. And then we will hear from the good Senator from 
Maine, Angus King, someone who has been dealing with this issue 
for a long time.
    Today's hearing is entitled, ``A More Efficient and 
Effective Government: Improving the Regulatory Framework,'' and 
I want to welcome all the witnesses that are going to testify 
on the three panels today. I want to thank them for joining us 
and sharing their perspective on this important issue.
    Now, some folks would think that every regulation that 
comes down the pike is a bad regulation, just the Federal 
Government's latest attempt to stifle economic growth or expand 
its reach. I certainly do not agree with every regulation that 
has come out in this or previous Administrations, but I do 
believe that some have gone too far, although I also believe 
that some have not gone far enough. And I believe that far too 
often agencies issue or proposed a one-size-fits-all regulation 
that stacks the deck against potentially smaller businesses, in 
my case family farms and ranches.
    Most recently I expressed my strong opposition to a 
proposal by the Food and Drug Administration (FDA) that would 
prevent small farmers from selling their products at farmers 
markets, and that treats groups of small farms like large 
corporations. Senator Hagan from North Carolina and I wrote an 
amendment to the Food Safety and Modernization Act to make sure 
that small farmers selling directly to local consumers would 
not face the same regulatory burden and scrutiny as the large 
agribusinesses with nationwide supply chains and much higher 
risks. However, the FDA's first draft rules were not in the 
spirit of the Tester-Hagan amendment and would have forced many 
small producers to close up shop, despite the fact that it was 
large producers that caused the food safety concerns in the 
first place.
    Another example is a proposed United States Department of 
Agriculture (USDA) rule that would turn over the role of 
government inspectors to company employees and allow facilities 
to process 175 chickens per minute. That is three per second, 
and a 25-percent increase. This rule would further advantage 
the biggest poultry plants and disadvantage the smaller 
facilities. In these two cases, you have one agency I believe 
overregulating the small guys and another agency cutting the 
biggest companies a break.
    But let me be clear. Over the years, regulations have 
helped keep our drinking water clean, they have ensured our 
food is more sanitary and labeled more accurately, and they 
have led to dramatic improvements in workplace health and 
safety. While some regulations have grown increasingly 
irrelevant or costly over time and can no longer be justified, 
there are others that have been on the books for years and 
years but remain just as relevant today as when they were 
passed. For instance, the regulation of rail rates, which was 
initially driven by farmers back in the late 19th Century who 
faced extraordinary rates when they brought their goods to 
market, and it is still an issue today.
    All you have to do is pick up a newspaper to identify 
another example or two of potential need for smart regulations, 
whether it is regulations on oil tankers, per the explosion in 
North Dakota a month or so ago, or 8.7 million pounds of 
diseased meat that may or may not have been distributed 
throughout this country.
    In approaching the topic of regulations from an oversight 
perspective, I believe it is critical that we seek a better 
understanding of the regulatory process. Why do some rules 
clear the review process under the 90-day deadline while others 
get stuck in a pipeline for years? How can we bring more 
transparency and greater efficiency to the process?
    The Administration has launched a lookback initiative to 
take a look at regulations already in place and identify those 
that are no longer relevant and what are some of the lessons we 
have learned from that. How can these lessons be incorporated 
to improve the regulatory process moving forward? These are 
some of the questions that we will be asking today.
    It is great to be joined by Ranking Member Portman, and it 
is your turn for your opening remarks.
    Senator Portman. Thank you, Mr. Chairman. Could I ask 
unanimous consent if I could do my statement in whole after we 
hear from our colleague from Maine?
    Senator Tester. It is against my better judgment. I should 
object, but I will not. [Laughter.]
    Yes, absolutely.
    Senator Portman. Before he goes, can I just say quickly, we 
are going to talk, I think, about the permitting legislation 
and to make the point that this is legislation that is 
bipartisan, Senator Claire McCaskill and others, streamlines 
and improves the Federal permitting process. Right now a lot of 
uncertainty, unpredictability there. And make the point that 
last week the House of Representatives did pass that 
legislation. It is called the Federal Permitting--it is also 
called the Federal permitting bill. It is not precisely like 
our legislation. We think our legislation might be a little 
better in some respects. But it did attract some Democrat 
support in the House, and so just to say I really appreciate 
Senator King's willingness to come today and talk about that.
    Senator Tester. Thank you, Senator Portman.
    Our first panel is Senator Angus King of the great State of 
Maine. Senator King has been a great advocate for commonsense 
reforms that help level the playing field for small businesses. 
I look forward to hearing from him on his ideas on how we can 
do more in that regard.
    With that, Senator King, the floor is yours.

 TESTIMONY OF THE HON. ANGUS S. KING, JR.,\1\ A UNITED STATES 
                SENATOR FROM THE STATE OF MAINE

    Senator King. Thank you, Mr. Chairman and Ranking Member 
Portman. Wonderful to have an opportunity to talk to you. I 
think this is a very important Subcommittee, and you are doing 
extremely important work. And what I would like to do is give 
you just a few minutes of my own background as it is relevant 
to what I am going to be talking about.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. King appears in the Appendix on 
page 33.
---------------------------------------------------------------------------
    I once was introduced at a dinner, and the fellow went 
through my resume, and I got up and said, ``The only conclusion 
I can take from that is that this fellow cannot hold a job,'' 
because I have had so many careers. I have been a lawyer. I 
have worked in public broadcasting. I have been a developer. I 
have been an entrepreneur, owned my own business. And I was 
also Governor of Maine for 8 years. And, in fact, when I was 
Governor, one of my primary focuses was on the regulatory 
process.
    When I was elected, I would say it was fair to say that the 
most controversial and in some cases disliked agency in the 
State was, not surprisingly, our Department of Environmental 
Protection (DEP). Everybody had a story about the problems they 
had with the regulatory process. So I have experienced--and I 
have also been a board member of large companies and small 
companies, particularly in the financial services field, so I 
have seen how regulation right now, I think, is far 
overburdening small community banks and financial 
organizations.
    What I would like to do is just run through very briefly 
four or five principles that I think need to be contemplated 
when we are talking about regulations and regulatory reform.
    Principle Number 1 is we live in a competitive world. 
Everywhere in the world people are trying to take our jobs. 
Everywhere in the world people are trying to compete with our 
companies and put them out of business, if they can, and take 
our jobs to their country. That means that regulation has to be 
smart. We do not have the luxury of being able to impose 
regulations that are going to impose unnecessary costs on 
businesses in this country that leads to the business and the 
jobs being shipped overseas. That is a constraint that we have 
to have in the back of our minds at all times. We do not have a 
free range to regulate in any and all fields with no regard to 
what the costs of compliance are and what the costs of 
implementation are, because somebody wants our jobs right now, 
today, all over the world. That is Principle Number 1.
    By the way, just to put a sharp line on that, a lot of 
people do not realize that in the last 10 years, 32 percent of 
the manufacturing jobs in the United States have been lost--32 
percent, 42,000 factories have closed. Not jobs lost but 
factories closed. And when you lose a third of your 
manufacturing capacity in one decade, that is not evolution. 
That is not a minor change. That is a revolutionary destructive 
change, and I think I do not need to testify to you gentlemen 
about the importance of manufacturing. I am not saying 
regulation was necessarily all or a part of that, but the point 
is we are in an economy where we are going to have to compete. 
We do not own the world market anymore.
    Principle Number 2, regulations have a cost, and not all 
regulations are created equal. One of the examples is the 
regulations that are currently starting to accumulate--
``accrete'' would be the word I would use--on the small 
financial centers, community banks. Androscoggin Savings Bank 
in Maine did not cause the great crash of 2008, but they are 
being burdened with piles of new regulations to issue simple 
home mortgages. One of the guys, my friend at one of the banks, 
sent me literally a stack of papers 2 feet high of regulations 
and forms that they have to comply with to do a simple home 
mortgage. That is having very deleterious effects.
    First, it is pushing the smaller banks into the arms of the 
larger banks, which is not exactly what we want to do. We want 
a lot of small institutions.
    Second, it is costing these banks money--I had a compliance 
officer from one of the community banks approach me on the 
street in Maine just a couple of weeks ago, and she said, ``We 
are having to let go loan officers to hire compliance 
officers.'' And this is in a community small savings and loan 
association.
    And, finally, it is having the effect of constraining 
credit, which is something our society needs right now, and 
these banks are not able to make loans for technical reasons 
because of regulatory reasons, even though they have good 
reason to believe that the borrower has good character and is 
able to repay the loan and meets any kind of reasonable 
criteria.
    The other way to look at this--and there are lots of 
studies--and I am sure you have seen them, and in my written 
testimony I cite some of them--where there have been studies of 
the cost of regulation in a kind of meaningful statistic. And 
the one that I focused on is cost per life saved. A lot of 
regulations are protective--health regulations--and, for 
example, the analysis was--and this is in my written testimony. 
The regulation of unvented space heaters, which are dangerous, 
is about $100,000 per life saved. I do not think many of us 
would quibble with that as an important regulation. Asbestos 
occupational exposure limit, about $9 million per life saved. 
The atrazine-alachlor in drinking water standard, $109 billion 
per life saved. And the point being that we have really got to 
think about what the cost versus the benefits are when we 
impose these regulations and that all regulations are not the 
same.
    Principle Number 3, time is money. Cape Wind, which is 
applying for a permit to build--I cannot remember how many 
turbines, about 100 turbines in the waters between Nantucket 
and Cape Cod in Massachusetts, has been in the permitting 
process for 12 years, and the developer spent $65 million just 
to get the permits. Now, I do not think there is a system--I 
just do not know how anyone with a straight face can argue that 
this is a good system.
    Now, we can argue about whether Cape Wind is a good idea or 
not, but some kind of decision should have been made somewhere 
short of 12 years and somewhere short of $65 million, because 
the developer--no rational developer will go to that extreme, 
and I believe in Cape Wind's case it is because Jim Gordon just 
said, ``They are not going to beat me,'' and he decided as a 
personal matter he was going to stay in. But the economics of 
it are terribly daunting, and what we do not see, gentlemen, in 
these kinds of cases are the projects that never get brought 
forward, the projects that are eliminated and intimidated and 
excluded because people look at this process and say I am not 
going to put myself in for that, I am not going to go through 
that, or I cannot afford to go through that. And our country 
loses dynamism and loses opportunity, economic opportunity, and 
jobs.
    One of the problems that we have--and this goes into the 
time is money, and I will talk a little bit about this and why 
I am announcing today that I am cosponsoring Senator Portman's 
bill. We have multiple regulators of the same essential thing. 
I do not know the details of the offshore wind project in the 
Nantucket Sound, but I know that we are talking about an 
offshore wind project in Maine that potentially is going to be 
regulated by the National Oceanic and Atmospheric 
Administration (NOAA), National Marine Fisheries, Coast Guard, 
U.S. Navy, the Federal Energy Regulatory Commission (FERC), and 
I am sure I am leaving several out. But when you have a 
situation like that where you have six or seven different 
regulators, by definition it is going to take a long time, and 
it is a crapshoot for the developer, because you can go to 
these permitting agencies one at a time, you go through, say, 
four, get your permit, spend $10 or $12 million, and then the 
fifth one says no and you are out of luck.
    One of the things we did in Maine to deal with this 
problem, we created a one-stop shopping process where we had a 
lead agency, said this is the agency that is going to issue the 
permits, all the other agencies have to do their study, take 
their position, and report in to the lead agency. But the 
serial permitting is as bad as serial killing. It is a form of 
serial killing, I guess. And I will get to that in a minute.
    Principle Number 4, attitude really is everything, and this 
is something we cannot get at through legislation. It would be 
really nice if we could legislate, ``All regulators shall be 
reasonable, thoughtful, and have a positive attitude.'' I do 
not think we can legislate that. This is where the 
Administration comes in. This is called leadership and 
management. And in my experience, you can change attitudes 
within regulatory agencies. We did it with our Maine Department 
of Environmental Protection, but it took active management and 
leadership from the commissioner that I appointed. When I took 
office in Maine, I was astounded to find--we have a 13,000-
person workforce. The Governor had the appointment power over 
about 150 people out of 13,000. But people expect the Governor 
to change everything. And I said, ``How am I going to change 
the DEP when I only can appoint three people?'' But the people 
I appointed were on a mission, and their mission was to make 
this a user-friendly agency. And they had classes and seminars 
and worked with the personnel, and that attitude actually 
changed, and some of the very same people that had been so 
difficult before--and the attitude is: Is the regulator there 
to help solve problems and abide by the law? Or are they there 
to find problems? And that is what is so important, and I 
cannot stress enough what a difference that makes. And that is 
really not something we can do much about here, but I do think 
it is a matter of the Administration and the management of the 
Administration sending the message--which I did in Maine. I had 
a very clear message to the environmental agencies. I said, ``I 
want to have the toughest environmental standards in the Nation 
and the most timely, predictable, and user-friendly process.''
    I do not think there is any inconsistency in those two 
things, but that message has to come from the management of the 
agency.
    Principle Number 5 I do not need to spend a lot of time on, 
but it is one that sometimes arises: Abuse of the process is 
not an appropriate regulatory technique. In other words, I am 
very close to the environmental community in Maine. I used to 
represent them at the legislature. I have been a big advocate. 
I stayed up late last night talking about climate change. But I 
part company with anybody who wants to use the regulatory 
process in a kind of war of attrition just to wear down 
somebody that wants to do something in our society. Projects 
should be judged on their merits and not on who wins protracted 
legal battles. So those are the principles.
    I have two problems and then two solutions, and I will be 
quiet. I notice, blessedly, my time thing is not running here, 
so that is a good thing.
    No. 1, permitting is generally too costly and the process 
is too lengthy. We did an upgrade of our power grid in Maine 
where I think 96 percent of the project--this was the 
transmission grid. Ninety-six percent of the project was in 
existing rights-of-way or right adjacent to existing right-of-
ways. Permitting that project took 4 years and cost $200 
million. It was about a $1 billion project. So almost 20 
percent of the cost of the project went into permitting, and 
basically it was, as I say, 96 percent of it was within the 
existing rights-of-way.
    That is a cost that we are all paying, and the question is 
whether--do the people of Maine get value for that $200 
million? Or was this something that could have been done in a 
more expeditious way? They had to go through a regulatory 
process in 70 towns. One town had over 30 meetings. I certainly 
do not want to be heard at this hearing saying I am against 
local control. I think it is totally appropriate. But I think 
that we need to be thinking about, what did the people of those 
towns in Maine get in exchange for the $200 million that it 
cost that project?
    Can we find a way to permit major projects at a cost that 
is not extraordinarily prohibitive and within a reasonable 
timeframe without trampling on the legitimate rights of people 
who need to have their voices heard and contribute to the 
outcome of the project?
    As I mentioned, we did something in Maine, we called it 
``one-stop shopping.'' I know that Senator Portman and Senator 
McCaskill have a bill, the Federal Permitting Improvement Act, 
which is establishing a lead agency, and as I understand it, 
Senator Portman, that is really the function, that is the 
direction you want to move in, a lead agency to coordinate the 
permitting process for major capital projects, those costing 
more than $25 million.
    I would like to cosponsor that bill. I think that is 
exactly the direction that we have to go in. And it also has 
some reform of the litigation provisions on the National 
Environment Policy Act (NEPA) suits so the statute of 
limitations is not 6 years but is a more reasonable period of 
time and gives people a reasonable chance to appeal the 
decisions, but they cannot just wait 6 years and let the clock 
run and thereby cast a pall on the overall validity of the 
permits.
    Major capital projects. I would like you to ask 
yourselves--and I think this is something that we all ought to 
do. The major piece of infrastructure in your State, whatever 
it is--interState highway, hydroelectric project, some major 
project, power project--ask yourself if that project could be 
permitted today. And if the answer to that question is maybe or 
no, then that illustrates that I think we have a problem in 
this country, because we cannot have our infrastructure be 
essentially a nostalgic photograph of what was built in the 
1950s. We have to be able to improve our infrastructure, and we 
have to be able to do it in a timely and a reasonable cost way.
    Problem Number 2, as I have already touched upon, is what I 
call regulatory accumulation. Regulations tend to have an 
eternal life, and they do not go away. I would commend to you 
the best book I have ever read about Washington. It is now out 
of print, but you can get it at Alibris or you could borrow it 
from me. It is ``The Institutional Imperative: Or How to 
Understand the U.S. Government and Other Bulky Objects,'' by 
Robert M. Kharasch, who was a Washington lawyer in the 1970s. 
It is the most brilliant analysis of institutional behavior 
that I have ever seen, and basically, his basic principle, the 
institutional imperative is that the fundamental function of 
any institution is to perpetuate itself. And one of the 
examples he uses--it is written like a geometry textbook with 
laws, theorems, theories, and corollaries. One of the laws is 
the iron law of the security office. The iron law of the 
security office is if you create a security office, threats to 
security will be found. And that is an example of this kind of 
regulatory process. If you hire people to regulate, they are 
going to regulate. That is what they are going to do. And we 
need to find better ways to ensure that we revisit regulations 
on a regular basis. Roy Blunt and I introduced S. 1390, which 
basically is a Base Realignment and Closure (BRAC) Commission 
for regulation, and the idea is an independent analysis of 
regulations to come before the Congress with recommendations 
about whether they should be continued, modified, or 
eliminated. They would have an expedited process in Congress, 
and this idea, by the way, came from the Progressive Policy 
Institute (PPI), and it has received quite a bit of positive 
attention.
    In conclusion, as I said at the beginning, this is a very 
important Committee, a very important topic. I think it is one 
of the most important that we can do, particularly--I just came 
from a meeting with housing authority directors. We are in an 
age of zero-sum game when it comes to finances. Nobody is 
getting any more money. Therefore, one of the things that we 
have to look at is where we can relieve regulatory burdens to 
allow people to go further with the funding that they have, 
whether it is a housing authority, a community bank, or a 
business.
    So I am delighted to have had the opportunity to meet with 
you this morning, and I apologize for going on so long, but 
this is a subject I feel very passionately about, as I hope you 
can tell. Thank you.
    Senator Tester. Well, I appreciate your comments. They are 
very insightful. And as long as you have consented to a few 
questions--this is actually very much out of the ordinary when 
a Senator comes to testify for a Committee. In fact, I believe 
this is the first time I have seen a Senator that would be 
willing to open themselves up to questions. And I had a whole 
bunch as you were talking through the principles.
    I am just going to ask you about one, and it probably is 
not in any recent books, but it deals with the amount of money 
that is being pumped into campaigns, both sides of the aisle, 
and if you have any thoughts on the dollars to campaigns' 
impact on the regulatory scheme out there.
    Senator King. You mean in terms of regulations of other 
things?
    Senator Tester. In terms of influence.
    Senator King. I cannot remember who it was, but somebody 
some years ago said we have the only system in the history of 
the world where perfect strangers are expected to give you 
large sums of money and expect nothing in return. I think an 
inherently dangerous system for democracy, and it has become 
even more so in the last few years. I do not think we 
collectively have fully realized the vast qualitative change 
that has taken place in campaign finance just in the last 3 or 
4 years since the Citizens United opinion and the rise of 
501(c)(4)'s and the super PACs and the dark money. I think that 
is a subject we could really spend some time on.
    I am not ready to allege corruption or direct connection or 
any of that kind of thing, but clearly it is not healthy for 
democracy to have that amount of money sloshing around in the 
system.
    Senator Tester. That is good. Thank you. Senator Portman.
    Senator Portman. Thank you, Mr. Chairman. Again, I 
appreciate having the hearing and appreciate the Chairman 
allowing us to go through all these issues. And to Senator 
King, that was terrific. I mean, I think the next book maybe 
you ought to write with all of your experiences you have had 
since you have not been able to keep a job. [Laughter.]
    I love the regulatory accumulation theory. I also think 
that you have laid out the case very clearly for not just 
cosponsoring the Federal permitting bill but also getting that 
thing done, because you are right, as a developer you ran into 
this. As a Governor, you ran into it. We run into it in Ohio 
all the time.
    One of the reasons that I got involved in this 
legislation--and I think I have told the Chairman this, but one 
of our companies in Ohio that is interested in hydropower on 
the Ohio River--it is called American Municipal Power--came to 
me and said, we are trying to do something good here in terms 
of energy, in terms of jobs, and we just cannot find investors 
because it takes too long to go through the permitting process.
    So it is your point about this notion that--I think the way 
you put it was, ``Time is money.'' And it is going to be tough 
for us to develop some of this infrastructure that everybody 
now is acknowledging we need to help in our infrastructure. It 
is hard if you have so many permits.
    So here is some data I think you and I have discussed, but 
the World Bank does this Ease of Doing Business study, and they 
rank all the countries in the world, and the United States has 
now fallen to 34th in the world for dealing with construction 
permits. And so to the extent capital flows across borders now, 
which it does, in an increasingly competitive global economy, 
as you talked about, investors everywhere are looking at that, 
not just American investors who are thinking maybe I should 
invest somewhere else, often an emerging economy, or often a 
developing country that does a better job with this, but also 
those investors overseas who are thinking about whether they 
are going to invest here or somewhere else are not likely to 
look at the United States if we are number 34. That means there 
are 33 countries where they can get a permit faster.
    So I appreciate your testimony. I thought it was very 
comprehensive. Former Interior Secretary and former Senator Ken 
Salazar, the Obama Administration Interior Secretary, recently 
said with regard to your Cape Wind example, ``Taking 10 years 
to permit an offshore wind farm like Cape Wind is simply 
unacceptable.'' And so this is about all forms of energy; it is 
about all forms of construction; it is about all kinds of 
permitting.
    You are right about the lead agency concept. That is in the 
legislation. You are also right about the no serial permitting; 
in other words, that is part of it, that the Federal Government 
would have to provide to the developer the permits at the 
outset so that you are not finishing one permit, then finding 
another one.
    We had testimony from the Energy and Power Subcommittee in 
the House recently. There were 35 separate Federal permits 
required for a single project, seriatim, serial permitting.
    So, look, I really appreciate your willingness to step 
forward and give us the benefit of your experience and advice 
and having you join Senators McCaskill, Donnelly, Manchin, me 
and others on this permitting bill is really great. And I 
really appreciate the Chairman's willingness to allow us to 
move forward with this.
    I have lots of questions for you, but I do not want to put 
you on the spot here today, so I will ask you those questions 
maybe on the floor of the Senate when we talk about this 
further. But just thanks very much for coming.
    Senator King. Well, thank you. And I just want to 
emphasize--and I think it goes without saying--nobody in this 
body, at least nobody that I know, and certainly not me, wants 
to gut regulation or wants to shortcut environmental review. I 
mean, I have spent my whole life defending the environment. But 
it does not have to be done in a clunky, inefficient, 
expensive, redundant, and overly burdensome way. And what we 
really have to separate is content from process, and we can 
have the standards and have the content. What we have to do is 
make sure the process makes sense.
    And to your point, one of my careers was with a small 
business that was in the hydro business, and we had a partner 
from the country of Norway who invested substantial funds. And 
after about 5 years, they pulled back basically because the 
regulatory process in America they just found baffling and it 
was a crapshoot. Capital goes where it can earn a return and 
where there is a reasonable certainty of that return. And, we 
should not rely on the fact that entrepreneurs are not only 
entrepreneurial but are willing to take what are sometimes 
really not very good risks on a regulatory process that is not 
predictable, is not timely, and is so incredibly expensive.
    So I really appreciate the work and your allowing me to 
appear before you. Thanks again, gentlemen.
    Senator Tester. We appreciate your contribution to the 
Subcommittee. Thank you, Senator King.
    Senator Portman, if you would like to go with your opening 
statement at this point in time, we would certainly be----

              OPENING STATEMENT OF SENATOR PORTMAN

    Senator Portman. Great. Thank you, Mr. Chairman, again, and 
Senator King can be excused now because he has other things to 
do, and if the other witnesses want to start heading to the 
table, that is fine, too. I am just trying to make it more 
efficient for everybody.
    But I do appreciate your letting us move forward on these 
hearings on these bills. I think this is an incredibly 
important hearing today. We are going to look at a number of 
different potential regulatory reform efforts.
    We all believe, as Senator King had said, that regulation 
is necessary, an important function of government. But it needs 
to be appropriately designed--I think Senator King made that 
point well--implemented properly. After all, it was regulation 
that took the lead out of our gasoline in 1973, secured United 
States financial markets after the Great Depression. 
Regulations are needed, but by its nature can be really 
complex. And this expanding catalogue of Federal rules has made 
it exceedingly difficult for us to attract investment and, 
frankly, to do what businesses do best, which is to help create 
jobs at a time when we are living through such a weak economic 
recovery.
    Each year well over 70,000 pages of additional regulatory 
requirements are now published in the Federal Register. That is 
70,000. And in the past two decades, the Code of Federal 
Regulations (CFR) has expanded by as much as 25 percent to an 
astounding 180,000 pages. Many of these new rules do represent 
significant costs to the economy, regularly in excess of $100 
million each year.
    Over President Obama's first 5 years in office, his 
Administration on average put out more than 53 of these major 
regulations each year, a substantial increase over what 
Presidents George H.W. Bush, Bill Clinton, and George W. Bush, 
each who had an average of about 45. So the annual costs of 
Federal regulations now they are estimating at $2 trillion, and 
this continues to grow substantially.
    So, again, I think we have made the point well already this 
morning that there is a way to do this smarter, and we have an 
opportunity here to see some examples of how to do that.
    I appreciate that Senator Pryor is here and Senator Tester, 
because they have both been involved in this issue and both 
have been involved with specific legislative initiatives to try 
to deal with this issue. I know that we are going to talk more 
about these bills, but the Regulation Accountability Act, for 
instance, is one of them where these Senators and others have 
agreed to step forward and say, hey, let us do this in a 
smarter way, and not just require cost/benefit analysis but 
look at the least burdensome way to achieve an objective, have 
appropriate judicial review for major rules, and come up with 
ways to eliminate rules that do not make sense.
    The public rightly expects us to do this. The principles of 
good government I think are already established in Executive 
Order (EO) 12866, and we have talked a lot about that in this 
Committee. It says ``only upon a reasoned determination that 
the benefits of the intended regulation justify its costs'' 
should a regulation be adopted and ``the most cost-effective 
manner to achieve the regulatory'' outcome. So I think in many 
respects, we need to just follow these principles of good 
governance that are already established in the Executive Order.
    I look forward to the testimony from our experts here 
today, Mr. Chairman. I want to particularly point out that I 
probably would not be sitting here, which might be a good thing 
for me or the country, if not for Boyden Gray, because he made 
the grave error of hiring me in 1989. In 1989, he hired me as 
Associate Counsel to the President and put me in his office in 
the White House where he immediately had me look at regulatory 
reform, believe it or not. So I appreciate Boyden being here in 
particular and his vast experience in this area.
    Thank you, Mr. Chairman.
    Senator Tester. Yes, thank you, Senator Portman, for your 
comments and your observations.
    Senator Pryor.
    Senator Pryor. Well, thank you, Mr. Chairman. I really want 
to thank you for having this today, because I know that Senator 
Portman and I asked that you would do this sometime, and you 
did, and we appreciate that very much. Senator Portman has 
really been a great leader on this. I want to talk about him in 
a just a moment.
    But one of the things that I have experienced in my time in 
the Senate is I have heard from many Arkansans and Arkansas 
businesses, particularly the smaller businesses that are 
struggling to meet the increasingly heavy regulatory burden. 
Each year Federal agencies issued more than 3,00 final rules, 
many of which do have a significant economic impact.
    President Obama emphasized in Executive Order 13563, 
President Obama emphasized that our regulatory system should 
promote economic growth, innovation, competitiveness, and job 
creation. I agree with that. Unfortunately, I do not think our 
regulatory environment does that. I think that it is time for 
Congress to review the laws that really form the foundation of 
our regulatory system. We need to find the ways necessary to 
make those laws fairer and more reasonable and more effective 
in meeting the dual challenges of protecting the public while 
making our economy stronger and more competitive.
    That is why I have teamed up with Senator Portman to 
introduce S. 1029, the Regulatory Accountability Act of 2013. 
We call it Portman-Pryor. He really does deserve the lion's 
share of the credit for working on this. It has been great to 
have a partner like him on this. But I do feel that, done 
right, the regulatory reform effort--the regulatory system can 
be better, cheaper, and faster.
    There is a lot in this bill. Some of it is basic. Some of 
it is very basic, like just requiring an agency, a regulating 
agency, just to State their statutory authority for doing what 
they are about to do. That is pretty basic stuff. But we have 
seen this before where they may not have that authority, it 
goes to court, and it turns out they do not.
    Some of it is much more complicated and really gets down in 
the weeds, but basically what the Portman-Pryor effort does not 
do is it does not go after one agency that may be unpopular on 
a certain thing, like the Environmental Protection Agency (EPA) 
or something, or, one agency on one specific thing. What it 
really does is amend the Administrative Procedures Act to 
really put a greater emphasis on early engagement between 
agencies and the parties subject to these high-impact rules 
that cost over $1 billion or more per year and major rules 
costing $100 million or more. These expensive rules are where 
the regulatory focus I believe should be. I mean, it is not the 
only focus, but I think that is where the biggest focus should 
be.
    And we all know that sometimes it takes way too long to do 
the rules, it takes way too long to get to the final product. 
So we need to find ways and I think one of Congress' 
responsibilities should be to really find ways to make this 
work a lot better than it is working right now.
    So, again, I want to thank the chair for his leadership. 
Chairman Tester has been great on this issue in a lot of 
different ways, trying to make for a more sensible, more 
commonsense regulatory environment here in the United States.
    Thank you.
    Senator Tester. Well, thank you, Senator Pryor. I 
appreciate your comments, and thank you for the kudos.
    We are fortunate in the second panel to have Howard 
Shelanski with us. Howard, welcome.
    Mr. Shelanski is the Administrator of the Office of 
Information and Regulatory Affairs (OIRA), an executive branch 
agency that reviews many of our rules and regulations. This 
Committee held Mr. Shelanski's confirmation last year, and it 
is always good to see you.
    We are going to swear you in. It is customary that we swear 
in all witnesses, so if you would stand and answer this in the 
affirmative, if you would like, or in the negative, if you 
would like, however you want to do it. Do you swear that the 
testimony you will give before this Subcommittee will be the 
truth, the whole truth, and nothing but the truth, so help you, 
God?
    Mr. Shelanski. I do so swear.
    Senator Tester. And let the record reflect that the witness 
answered in the affirmative.
    Mr. Shelanski, you have the floor.

   TESTIMONY OF THE HON. HOWARD SHELANSKI,\1\ ADMINISTRATOR, 
    OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Shelanski. Thank you very much. Chairman Tester, 
Ranking Member Portman, Senator Pryor, and Members of the 
Subcommittee, thank you for the invitation to appear before you 
today. I am pleased to have this opportunity to discuss recent 
developments at the Office of Information and Regulatory 
Affairs, and my priorities for OIRA going forward.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Shelanski appears in the Appendix 
on page 39.
---------------------------------------------------------------------------
    Since I became OIRA Administrator this past July, it has 
been my privilege to work with OIRA's outstanding staff, with 
the first-rate leadership team at the Office of Management and 
Budget (OMB), and with our colleagues across the Federal 
Government. Together we are working to promote economic growth 
and opportunity while simultaneously protecting the health, 
safety, and welfare of Americans now and into the future.
    OIRA does not set the agencies' policy agendas. The office 
does work with agencies to ensure that the regulations through 
which they implement policies are efficient, well designed to 
achieve their objectives, and based upon the best available 
evidence. Through the fourth fiscal year (FY) of this 
Administration, the net benefits of rules reviewed by OIRA 
total $159 billion, and we expect the fifth fiscal year numbers 
to show $25 billion in additional net benefits.
    Three priorities for OIRA, both now and looking ahead, are 
the clarity and reliability of the review process and 
regulatory environment, rigorous analysis of rules under 
review, and retrospective review, or lookback, of existing 
regulations.
    Clarity and reliability allow people, businesses and 
organizations, and States and localities to plan for the 
future. It is, therefore, important that stakeholders have 
notice of the government's plans for forthcoming regulatory 
activity. To that end, OIRA is charged with assembling and 
publishing a Unified Regulatory Agenda each spring and fall, 
setting forth the expected regulatory actions to be undertaken 
by Federal agencies over the coming year. OIRA published the 
fall 2013 Unified Regulatory Agenda and Plan just before 
Thanksgiving and is on track to publish the update to the 
Unified Agenda this spring.
    The agenda is a broad list that includes all of the 
regulations under development or review during the next 12 
months, as well as longer-term actions that the agencies are 
considering. Such an inclusive listing makes the regulatory 
environment more transparent and participatory for all 
stakeholders, especially when combined with the annual plan, 
which focuses more narrowly on regulatory actions the agencies 
intend to issue in proposed or final form within the upcoming 
fiscal year. As OIRA Administrator, I will, therefore, continue 
to do all I can to ensure timely publication of the Unified 
Regulatory Agenda and Plan.
    Of similar importance to the clarity and certainty of the 
regulatory environment is that both new rules and those already 
under review--move through OIRA as efficiently as resource 
constraints and rigorous analysis permit. Reducing the 
frequency of extended regulatory reviews and working with 
agencies on rules that are already under extended review are 
key objectives for OIRA. Thanks to the tireless work of OIRA 
staff, we have significantly reduced the number of rules that 
were under review for more than 200 days, and the number of 
rules under review for more than 90 days is down considerably 
and continues to fall.
    In addition to improving the clarity of the regulatory 
environment through notice and timeliness, we are updating the 
tools the public can use to engage in the rulemaking process. 
We continue to explore ways to make improvements to our 
information systems that will increase transparency, including 
making the disclosure of information associated with regulatory 
review more complete, automated, and user friendly.
    While increasing the predictability of the regulatory 
process through timely review of rules and regular publication 
of regulatory plans and agendas is essential, Executive Orders 
13563 and 13610 also make clear that flexibility and removal of 
unnecessary burdens are essential elements of the Federal 
rulemaking process. Improving existing rules, ensuring 
regulatory flexibility for small businesses, and reducing 
unnecessary regulatory burdens for everyone through the 
retrospective review process are high priorities for me as 
Administrator.
    Executive Order 13610 asks agencies to report regularly on 
the progress of their retrospective review activities. This 
week, agencies are posting their most recent retrospective 
review updates on their Web sites. Taken together, Federal 
agencies provided updates on their initiatives, many of which 
are new efforts that agencies added since their July 2013 
listing of lookback plans. These efforts are already saving 
more than $10 billion in regulatory costs in the near term, 
with more savings to come. Some additional examples that will 
add to these savings include:
    The Department of Transportation's proposed rule to rescind 
the requirement that truck drivers submit and retain certain 
kinds of inspection reports, a change that would save 
approximately $1.5 billion in annual paperwork;
    In the area of export control regulations, streamlined 
licensing processes are now finalized for 11 of 17 targeted 
categories of export controls, with more in the works;
    And the Department of Veterans Affairs (VA) issued a 
proposed rule to reorganize and rewrite its compensation and 
pension regulations making it easier and less costly for 
claimants, beneficiaries, veterans' representatives, and VA 
personnel to locate and understand these regulations.
    While there has been important progress on retrospective 
review, I think we need to do even better. At OIRA, we are 
working, along with colleagues elsewhere in OMB and at the 
agencies, on several ways to further institutionalize 
retrospective review as an essential component of government 
regulatory policy. As part of this effort, we are developing 
several features that will make regulatory lookback a more 
systematic priority for agencies. Such institutionalization of 
retrospective review, both to ensure follow-through on existing 
plans and to help agencies develop their future plans, will be 
one of our key objectives moving forward.
    Thank you very much, and I look forward to your questions.
    Senator Tester. Well, thank you very much for your 
testimony.
    I am going to start by going back to what Senator King 
talked about as some of his principles. First of all, how many 
employees are in your department?
    Mr. Shelanski. Right now we are at roughly 45 full-time 
equivalents (FTEs).
    Senator Tester. OK, and I will get to that in a second. One 
of the things that Senator King talked about initially is that 
the regulations need to be looked at from a competitive 
standpoint. Are you able to do that? Is that part of your 
mission?
    Mr. Shelanski. Thank you for your question, Mr. Chairman. 
It is part of our mission. In Executive Order 12866, in the 
section that talks about taking account of the costs and 
benefits of regulation, competitiveness is actually one of the 
factors that is specifically mentioned that should be taken 
into account in assessing the burdens or costs a regulation 
might impose.
    Senator Tester. So what do you do if you think regulation 
is anticompetitive?
    Mr. Shelanski. Well, one of the things that we always look 
to do when we are reviewing a rule at OIRA is to examine all of 
the costs that the rule might create, as well as the benefits. 
And we ask agencies to come to us with their best evidence of 
all of the different costs that might result. And we are 
charged under a variety of statutes--the Regulatory Flexibility 
Act, the Paperwork Reduction Act--to look for areas where we 
might be able to encourage the agency or ask the agency to 
reduce such burdens.
    Senator Tester. OK. So you do that in written form? Do you 
send back recommendations to them?
    Mr. Shelanski. There are a variety of ways that there is a 
lot of deliberative process back and forth between the staffs 
of agencies and OIRA.
    Senator Tester. As the review goes on?
    Mr. Shelanski. As the review goes on.
    Senator Tester. OK. Look, we just had a hearing earlier 
today on congressional intent of a regulation on banks versus 
insurance companies. And it was pretty apparent at that hearing 
that the authority for regulation is nothing like what Congress 
had passed. Why is that? I mean, maybe you do not see it that 
way, but I certainly do. There are many regulations that we put 
up, and congressional intent does not seem to be a part of the 
equation once it hits the agency.
    Mr. Shelanski. Mr. Chairman, that is a question I would 
have to do some more thinking about. That is a big question. We 
typically see rules that are well within the authority of the 
agencies to issue, and we----
    Senator Tester. There is no doubt about that.
    Mr. Shelanski. Yes.
    Senator Tester. The question, though, is that when we pass 
a rule and the discussion that is around that rule, whether it 
is in Committee or on the floor, often indicates what Congress 
would like to see in a regulation once it is out. Just let me 
ask you this: Does OIRA take that into consideration? And, by 
the way, you are not the end-all and the be-all, so I do not 
expect you to do everything I am asking you. But the fact is I 
am curious to know if, in fact, you are able to take a look at 
proposed regulations and refer them back to the intent of 
Congress.
    Mr. Shelanski. We typically look at the regulations on 
their own terms once they are determined to be within the 
agency's authority.
    Senator Tester. OK. You have 45 employees, and I know that 
there are a lot of regulations that come out, maybe rightfully 
so, maybe not. How do you assess your staffing and your 
department?
    Mr. Shelanski. Like, I think, the agencies that we work 
with on their regulations, like the rest of the Office of 
Management and Budget, we are all working very hard to do a lot 
with what I would describe generously as ``streamlined 
resources.''
    Senator Tester. Do staffing challenges make it difficult 
for you to do your reviews on time?
    Mr. Shelanski. I think that if we had, like the rest of 
OMB, like the agencies, if we had more staff, we would be able 
to work more quickly. But I think we are managing to do a 
pretty good job reviewing most rules within the normative time 
of the Executive Orders.
    Senator Tester. OK. You recently talked about improving 
transparency as being one of your goals for this year, but you 
cite a number of challenges to achieving that goal of greater 
transparency.
    First of all, why do you think transparency is important? 
And, No. 2, how do we make it so you can achieve it?
    Mr. Shelanski. Thank you very much for that question, 
because I do think that transparency, Mr. Chairman, is actually 
one of the key features that really distinguishes the American 
regulatory process. We have a process in which people have 
notice of rules that are forthcoming. They get an opportunity 
to comment on those rules during a period when there is still 
the prospect of meaningful change. And agencies are held 
accountable by the courts in taking public input meaningfully 
into their process and into account in finalizing the rule. So 
transparency is extremely important in the process, and I think 
we actually have a remarkably transparent process by any 
comparison.
    Senator Tester. Based on what? I mean, why do you say that?
    Mr. Shelanski. We have a process here in the United States 
that, when one looks around, we have stakeholders--businesses, 
citizens, activist groups, anybody who wants to come in has a 
chance under the Administrative Procedures Act, under the 
Executive Orders, to weigh in and get their views heard.
    Senator Tester. All right.
    Mr. Shelanski. And the courts hold the agencies 
accountable.
    Senator Tester. OK. Thank you very much. Senator Portman.
    Senator Portman. Administrator Shelanski, I appreciate your 
being here. You probably have the most important job in 
Washington that nobody knows about. And it is not just an 
important job; it is a really hard job. I was there at a time 
when we had the opportunity to hire somebody for your role, and 
I talked to a lot of people and ended up with someone who had 
expertise, as you do, in this and got to learn more about the 
skills that are required, so we appreciate your service.
    As you know, I think our regulatory costs are going up, not 
down. It concerns me. If I look at the White House language on 
this, it says, ``We are constantly trying to minimize 
regulatory burdens and avoid unjustified regulatory costs.'' 
That is something I agree with totally. And yet when I look at 
one of the real measures of regulatory output, what should be 
the costs of these economically significant rules--that is, the 
rules with $100 million or more impact--in the first term, 
which are the numbers that we have, the Obama Administration 
was far more aggressive than any of their predecessors.
    In fact, if you look at the Administration's own estimates, 
the costs of those significant rules would be greater than the 
costs in 2012 alone, which is, I think, the last year for which 
we have data--that one year would be higher than the entire 
cost of the first term of the Clinton Administration and the 
first time of the George W. Bush Administration.
    So I do think there is a change, and this past year is no 
different. In 2013, what we have is that regulators had 
published $112 billion in net and regulatory costs, including 
the deregulatory measures, and added 157.9 million paperwork 
burden hours. So I guess, my general question to you is: Can we 
do better?
    Before I ask you to answer that more general one, let me 
just talk specifically about the lookbacks and trying to 
eliminate old, inefficient rules. Again, I think it is a good 
idea. I, again, am focused on, how do we look at the actual 
results of that. Of the first 90 rules changes initiated as 
part of the regulatory lookback, the estimated compliance cost 
is $3.3 billion, according to an analysis by American Action 
Forum Data Agency published in the Federal Register. Your 
testimony suggests that the more recent efforts have boosted 
lookback savings costs to around $10 billion. When you put that 
figure in context, the picture becomes a little less 
encouraging. According to data reported by the agencies 
themselves, in 2012 alone, again, the administration's new 
regulatory burdens imposed $236 billion in new burdens, so we 
are talking about a relatively small reduction in burden, 
whether it is 3.3 or 10 billion, compared to the new costs.
    This same report I talked about says even if you look at 
only the first 90 rules undertaken by the agencies as part of 
this lookback, the new costs that are involved total $11 
billion. In other words, the lookback itself, because it 
expands other rules, cost $11 billion, and yet the savings is 
either $10 billion, in your latest testimony, or $3.3 billion. 
In other words, the costs of regulations attributed to the 
lookback rules actually exceeded the cost savings.
    Now, that might not be true going forward, but it does 
concern me. The most recent analysis I have seen examining 
quantified rulemaking in the retrospective reports found that 
the rules' increasing costs outnumber rules implementing cost 
savings measures by a ratio of 3.7:1.
    So the first question for you here is: How can agencies be 
incentivized to institute meaningful regulatory reviews that 
will improve existing regulations and actually reduce overall 
regulatory burdens? And what would you do to institutionalize 
that kind of a retrospective review?
    Mr. Shelanski. Thanks very much for your question, Senator 
Portman. Without being able to comment on the particular 
numbers or the particular report that you identified, I think 
that the important thing to keep in mind is when a 
retrospective review is done, it is typically done through a 
rulemaking. You need to do a rulemaking to change a rule. And 
we look, when we examine a retrospective rule, just as we do 
with any other rule, to make sure that that rule, where 
permissible by statute, is cost justified--that is to say that 
the benefits justify the costs.
    So we would be very concerned if we saw a rule that was 
supposed to be reducing regulatory burdens that, in fact, 
imposed regulatory burdens that exceeded the savings. And so we 
do in the retrospective review process, just as in the review 
of new regulations, look very carefully at the regulatory 
impact analysis and the costs and benefits.
    So what we are trying to do to further institutionalize the 
lookback effort is to do a number of things. One thing is to 
ask agencies to get into the habit--I think they have been 
really excellent in getting into the habit of identifying 
retrospective review plans, posting them, and every 6 months 
telling us which ones have you accomplished, which new ones are 
you adding, which one are ongoing.
    So the retrospective review reports that we receive from 
agencies and that we review prior to their posting them on 
their Web sites are, I think, a key part of institutionalizing 
and creating a mechanism, a routinized mechanism, if you will, 
within the agencies of looking for good targets for lookback.
    But we have other things that I think we need to start 
considering, that we need to start working with the agencies 
on, to make sure that there is follow-through on the plans that 
they list and that the plans that they have identified are 
really the valuable plans.
    The truth is lookback is very difficult, as Senator King 
said. It is not the easiest thing in the world to find high-
cost, low-benefit rules that are just lying around on agency 
books. Most of the low-hanging fruit has been harvested in this 
regard.
    So it is a substantial dedication of effort and resources 
by the agency, and we look forward, both at OIRA and with our 
colleagues on the management side of OMB, to working with the 
agencies on a number of mechanisms by which those resources and 
that focus will be increased going forward.
    Senator Portman. OK. Well, we will share with you these 
numbers, and if you could give us a response in writing, that 
would be terrific as to why you think the analysis is right or 
wrong. And, again, the analysis that we have would indicate 
that in the lookbacks there have been higher costs imposed than 
actual savings, which, of course, is not your intent, as you 
say.
    With regard to institutionalizing it, it is good for me to 
hear that you think the agency attitude is to look--talking 
about agency attitude, just one other question. Do you think 
that agencies face a sort of inherent conflict of interest in 
looking at their own rules in terms of the costs and benefits? 
And is there a role here for OIRA, or for the Government 
Accountability Office (GAO) or maybe an independent 
congressional regulatory review office, to be tasked with 
evaluating the actual costs and benefits of regulations after 
they have been implemented?
    Mr. Shelanski. In my time as Administrator, so since July, 
I have not encountered a situation in which an agency has 
seemed hampered by a conflict of interest in reviewing one of 
its own rules. The agencies, insofar as I have dealt with them 
on retrospective review, have been quite interested in doing 
good policy and trying to improve their regulatory systems.
    Senator Portman. Thank you, Administrator.
    Thank you Chairman.
    Senator Tester. I have a couple quick questions here. 
Executive Order 12866--hopefully that rings a bell--directs 
disclosure of all substantive comments and changes, which 
includes the informal review process. Are those publicly 
disclosed?
    Mr. Shelanski. Just to clarify, Mr. Chairman, of course the 
comments that are submitted during the public comment period 
that a rule has been put out for comment by an agency are 
disclosed and are docketed. We have meetings under Executive 
Order 12866. We do not ask for the meetings, but any party that 
wishes to weigh in on a rule under review at OIRA is entitled 
to have a meeting with me or somebody who I designated.
    Senator Tester. OK. And those----
    Mr. Shelanski. We docket those meetings and any materials 
provided.
    Senator Tester. OK. So it is for public examination.
    Mr. Shelanski. Yes. Very often there are no materials 
provided, but the fact of the meeting, who attended, and 
anything that they provided in terms of materials is docketed 
and available to the public.
    Senator Tester. OK. There have been 38 rules that have been 
posted on the OIRA Web site for public comment for longer than 
6 months. What is the main impediment to getting these reviews 
out?
    Mr. Shelanski. There can be a variety of reasons that a 
rule goes beyond the 90 or--there are permissible extensions, 
but the normative times established in the Executive Orders. 
Very often a rule is very complicated, it is extremely long and 
detailed, and the normative time of 90 days in the Executive 
Orders does not necessarily fit for all rules. And very often 
what happens during the review procedure, just speaking 
generally, is OIRA staff will raise very serious questions, or 
through the interagency review process, an agency that may have 
an interest in what another agency is doing might need quite a 
bit of time to fully understand what the implications of that 
rule will be for its regulatory program. And there can be a lot 
of discussion amongst the agencies. And at the end of this 
process, the agency that wishes to promulgate the rule may want 
to do more research, may need to do additional studies, may go 
partially back to the drawing board. And during that period, 
the rule is back with the agency, and it could be for a very 
good reason. It could be to improve the rule, to solidify the 
underlying evidence.
    So one of the reasons for an extended review period can 
simply be that new information came to light during the review 
process that required a bunch more effort.
    Senator Tester. OK. I would just like to get your opinion. 
You review rules all the time, and the one-stop shop suggestion 
where you have a lead agency on regulations, do you have an 
opinion on that?
    Mr. Shelanski. So I do not have an opinion to offer here 
today. I would note that I did listen with great interest to 
Senator King's discussion of permitting and the idea of a one-
stop shop for permitting. And I know that the Administration is 
absolutely committed to ensuring that we do have 21st Century--
not the nostalgic infrastructure but 21st Century 
infrastructure, and that the permitting that will allow for 
that infrastructure to develop can occur efficiently in a 
modern way that is consistent with protecting our communities 
and protecting our safety. And the President through a 
Presidential memorandum did charge the Council for 
Environmental Quality (CEQ) and the Office of Management and 
Budget with leading a task force that would help to come up 
with suggestions and proposals for that streamlining. And the 
Office of Performance and Personnel Management at OMB is 
working with CEQ on that effort, and I would be very happy to 
take that question back to them.
    Senator Tester. That would be fine. Do you know if there is 
a timeline for recommendations from that?
    Mr. Shelanski. I believe there is, sir, but I do not know 
exactly what it is off the top of my head.
    Senator Tester. Well, I appreciate that.
    Senator Portman, further questions?
    Senator Portman. Yes, just, I guess, following up on that. 
In March 2012, there was an Executive Order issued as to 
permitting specifically, and I do not know if that is the 
memorandum you referred to earlier. It sounds like that might 
be different. This is an Executive Order. And it said it was 
aimed at improving performance of Federal permitting and review 
of infrastructure projects. It is aimed at more efficient and 
effective review projects, faster decisionmaking, transparency, 
predictability, accountability for infrastructure permitting.
    The White House has said that since that Executive Order, 
agencies have expedited the review of a number of major 
projects, 22 of which have completed the Federal permitting 
process. There was a dashboard Web site containing a searchable 
database of information for certain projects selected as part 
of the initiative, so it is almost like a pilot program, it 
sounds like to me, on dashboards.
    And you might have heard Senator King talking about the 
Federal Permitting Improvement Act that he is now a cosponsor 
of, and it creates, as you probably know, a permitting 
dashboard that is similar to this White House initiative, and 
it would be available for larger projects, would provide 
information on the status of the permits, status of approvals, 
the NEPA reviews, basically providing more transparency and 
accountability in permitting.
    As OIRA Administrator, do you support this concept of a 
permitting dashboard called for in the Federal Permitting 
Improvement Act to encourage that transparency and 
accountability?
    Mr. Shelanski. Senator Portman, I am not in a position 
today to articulate an administration position on the bill, 
but, of course, I would be very interested in the discussions 
that would have to happen both within the Administration and 
between the Administration and Congress in formulating such a 
position.
    I will say that I do fully support as OIRA Administrator, 
of course, the Administration's objectives that you mentioned 
that are articulated in the Executive Order and, to the extent 
that those have a regulatory component, look forward to working 
in a complementary way with any of these permitting 
initiatives.
    Senator Portman. OK. You better say nice things about the 
Federal permitting bill because Senator McCaskill has just 
arrived.
    Mr. Shelanski. Just in time.
    Senator Portman. You do not have to be nice to me, but you 
better be nice to her.
    OK. Let me ask you one quick one on independent regulatory 
agencies, and I will try again not to put you on the spot, 
because I do think that dashboard that we are talking about for 
all projects is consistent with the dashboard that you have in 
your own Executive Order. But on the independent agency review 
issue, as you know, Senators Warner and Collins and I introduce 
this thing that basically takes the President's language, as I 
see it, and codifies it to make sure independent agencies are 
subject to cost/benefit analysis requirements, other burden-
reducing principles that have long governed the executive 
branch agencies that you review. It would require submission to 
OIRA for a non-binding evaluation of the agency's analysis in 
the public record. And prior to becoming OIRA Administrator, 
you helped lead one of those independent agencies, and, 
therefore, I think you are qualified to speak on this issue.
    Out of the 21 major rules issued by independent agencies in 
2012, not one was based on a complete cost/benefit analysis. 
Now, that is based on OIRA and GAO annual reports. There are 
also some other literature on this that I am happy to share 
with you, but that is our sense of it, that it just does not 
happen. The same basically was true in, by the way, 2009, 2010, 
and 2011. So we are not seeing the kind of independent agency 
review the President called for in his Executive Order.
    Again, having been someone who led an independent agency 
that was regulatory, do you believe it would be of value to 
require sound review rulemaking principles through independent 
regulatory bodies and to provide third-party review of the 
rules they promulgate?
    Mr. Shelanski. Thank you, Senator Portman. Maybe because I 
did work at two independent agencies, I particularly value the 
independence of those agencies, and I think that in my 
experience, the agencies do a conscientious and careful job 
with their rulemakings. I do think that the Executive Order 
helps in that regard in letting the independent agencies know 
sort of what additional principles they might want to bring to 
their rulemaking.
    So I think the way the current system works, the tools that 
the independent agencies have and the tools that we have at 
OIRA where we are available to consult upon request or to 
discuss rulemakings with those agencies if they have questions 
about implementing the Executive Order work quite well.
    I have not had the chance to discuss within the 
Administration any official administration position on the 
bill, so I am certainly not in a position to comment in that 
regard now. But my own experience is that the independent 
agencies are--while all agencies can do better, they are doing 
a conscientious job with their rulemakings.
    Senator Portman. So you would disagree that out of the 21 
major rules, say in 2012, that none were subject to a complete 
cost/benefit analysis? You think it is just fine what they are 
doing?
    Mr. Shelanski. No, I do not disagree with the OIRA report, 
but I do think that the independent agencies are subject to all 
of the APA requirements, they are subject to judicial review; 
and I just am not in a position to say right now whether any 
particular piece of legislation would improve the situation.
    Senator Portman. We would differ on judicial review, unless 
you are talking about specific statutes that have judicial 
review within them. But my time has expired, so we will come 
back maybe with some questions in writing on that as well.
    Thank you.
    Senator Tester. Senator McCaskill.
    Senator McCaskill. I know my colleagues and my cosponsor 
have covered most of this, and I do not want to belabor it by 
going back through some of the points that I would like to 
emphasize. But I would ask you this question: Do you think that 
one of the problems we have in this regard, in government there 
are people like you who are giving your time and your service, 
and you are kind of way up here. And then there are entry-level 
people, and then there is what I call the calcified middle. And 
the calcified middle in most instances are the ones that are 
driving the rules and regs.
    Do you think that the lack of private sector experience in 
that calcified middle has an impact on some of the nonsensical 
outcomes we have on some of these rules in terms of delays and 
failure to do adequate cost/benefit analysis?
    Mr. Shelanski. My experience with the people who write the 
rules at the agencies is that they are very attentive and very 
thoughtful about what they are doing. I have not seen a major 
rule come to OIRA in my time there where the heart of the 
agencies that have been involved with writing the rule have not 
engaged in fairly significant interaction with stakeholders and 
actually taken that stakeholder interaction quite seriously.
    There are times that their analysis can be improved, and 
that is one of the things that my office tries to work with the 
agencies to do, and so I think we provide a valuable function 
in terms of providing some additional perspective.
    But I have not noticed, at least on the major rules that I 
have had the opportunity to participate in reviewing in the 
last 8 months, the kinds of hazards or problems to which you 
are alluding.
    Senator McCaskill. Well, it is hard to imagine that we 
could make it any more complicated or difficult than it is 
right now with some of these rules. So hopefully we can get 
some of at least our permitting stuff that we know costs real 
money, that we can maybe get some action on that legislation 
that would make things go quicker and make accountability more 
clear.
    So thank you very much for being here today.
    Mr. Shelanski. Thank you, Senator.
    Senator Tester. Thank you, Mr. Shelanski, for your 
testimony and your availability for questions. We will release 
you now and bring on the third panel. Thank you very much and 
good luck.
    Mr. Shelanski. Thank you, Mr. Chairman.
    Senator Tester. Now on our third panel we have three 
witnesses to round things out, and you folks can come up and 
sit down as I introduce you.
    We have Michelle Sager, who is the Director of Strategic 
Issues at the U.S. Government Accountability Office. In this 
role she oversees GAO's analysis of the regulatory process. I 
want to thank you for being here, Michelle.
    We have Katherine McFate, the president and CEO of the 
Center for Effective Government and who co-chairs the Coalition 
for Sensible Safeguards. The Center for Effective Government is 
a nonpartisan organization that advocates for transparency in 
government. We appreciate you being here, Katherine.
    And last, but certainly not least, who Senator Portman 
brought up, Boyden Gray, who is the former Ambassador to the 
European Union and the White House Counsel to President George 
H.W. Bush, who appointed him as Counsel to the President's Task 
Force on Regulatory Relief. It is great to have you here today, 
Boyden, and I appreciate you taking the time.
    As with the previous panel, I would just like you to please 
stand and answer in the affirmative or the negative as I swear 
you in. Do you swear that the testimony you will give before 
this Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Gray. I do.
    Ms. McFate. I do.
    Ms. Sager. I do.
    Senator Tester. Let the record reflect that the witnesses 
answered in the affirmative. I am going to start out with you, 
Mr. Gray, and then we will just go down the panel, I should 
say, but once again, welcome, Boyden, and go ahead.

  TESTIMONY OF THE HON. C. BOYDEN GRAY,\1\ FOUNDING PARTNER, 
                 BOYDEN GRAY & ASSOCIATES, PLLC

    Mr. Gray. Thank you very much, Mr. Chairman, and Senators 
McCaskill and Portman.
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    \1\ The prepared statement of Mr. Gray appears in the Appendix on 
page 42.
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    Senator Portman was the best hire I ever made, so I wish he 
was still in closer proximity. But the sky is the limit, 
perhaps.
    This is a great opportunity for me to make just a couple or 
three points. I believe that overregulation, unnecessary 
regulation, is a major wet blanket on growth, opportunity, 
innovation, and employment, and so this is to me a very big 
deal.
    I want to talk about the Regulatory Accountability Act a 
little bit, the permitting proposal that Senator Portman has 
put up, and Senator King joined, and also just a comment about 
legislative reform.
    On Regulatory Accountability, it codifies the cost/benefit 
requirements that have been in place as a matter of Executive 
Order for many years, since 1981 at least, subjects them to 
judicial review. This is, I think, better than what you get 
under the Executive Order, which is not reviewable. It also 
would apply this to independent agencies. I do not think there 
is a single academic in the country who would really argue 
today that independent agencies should not be covered in the 
same way the other agencies are. The fact that they are not, 
for example, gives Europeans heartburn because it has so deep 
an impact on financial services where there are so many 
divergent issues that are facing Europe and the United States.
    On the permitting proposal, this addresses one of the most 
insidious brakes on economic growth, in large part because it 
involves so many hidden delays and so many hidden burdens and 
hurdles. And the one-stop shop idea, putting OMB in at the 
heart of leadership, I think would be very important.
    I want to make a parenthetical comment that 45 people is 
not enough in that office. I think when we started out doing 
this in 1981, I think there were double the number. And, of 
course, the workload of that office has increased since then. 
But if you are going to add independent agencies to the review 
process, I think you have to also give OMB the resources.
    I think the permitting thing, if you look at one report in 
my testimony for the new gas shale that there is a new 
opportunity, which is much under discussion today because of 
what is happening in Ukraine, there are 1,400 miles of pipeline 
that must be built yearly just to move this gas around the 
country to where it is needed, to say nothing of moving it to a 
place where it might be exported. EEI says it is going to be 
spending $50 billion over the next 10 or 15 years on 
transmission lines. None of this will take place without 
permitting, and if the permitting is not expedited, none of it 
will take place period.
    So I am very much in favor of this legislation. It puts a 
time limit, as Senator King noted, on judicial review. It gives 
6 months to decide, not 6 years, and I think that is completely 
reasonable.
    If you look at what EPA is proposing for so-called PSD, 
prevention of significant deterioration, it seems like it is 
pretty obscure, but it would allow them to regulate every 
building construction project practically in the country over 
time. And I think that is just really overkill.
    My one substantive comment about legislative review is that 
there is a lot of stovepiping in the Congress, as there is, of 
course, in the executive branch. Agencies and committees, 
committees like this one, do not have the proper scope to make 
the changes that need to be made or the oversight that needs to 
be conducted. And so what I would recommend, in addition to 
what you are already proposing, is a joint committee of some 
sort that could take a broader view of what is going on across 
the Senate, across the House, and take into account all the 
things that are going on, the interconnections, the 
disconnects, and that I think would make it easier to perform 
the oversight function that you are really doing a great job as 
it is now.
    So thank you very much for the opportunity to appear.
    Senator Tester. Well, thank you very much for being here, 
Mr. Gray. We certainly appreciate your testimony. Katherine 
McFate.

    TESTIMONY OF KATHERINE MCFATE,\1\ PRESIDENT, CENTER FOR 
                      EFFECTIVE GOVERNMENT

    Ms. McFate. Thank you, Chairman Tester, Ranking Member 
Portman. I think I am the outlier on this panel. As the co-
chair of the Coalition for Sensible Safeguards (CSS), we are a 
collaboration of 150 groups of consumers, small businesses, 
scientists, environmentalists, health and safety advocates, and 
we are committed to defending and improving our regulatory 
system.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. McFate appears in the Appendix on 
page 94.
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    Our system of public protections has made America a better, 
safer place. Workplace fatalities are a fraction of what they 
used to be. Our air is less polluted. Our rivers are cleaner. 
Our food, drugs, toys, and cars are all infinitely safer than 
they were 30 years ago.
    Our system of public protections has given us the highest 
standard of living in the world. They have encouraged our 
businesses to innovate and to improve, and they have produced 
broadly shared prosperity.
    But our infrastructure, both public and private, as we have 
mentioned here, is aging. Resources for enforcement are 
declining. Resources for inspections are declining. And our 
standards and safeguards are not keeping up with the fast of 
scientific knowledge, because our rulemaking system has become 
increasingly slow and opaque. The regulatory process has been 
burdened by unnecessary delays, process burdens, analytic 
requirements, and new legal challenges, all of which make it 
harder for us to translate new scientific knowledge and 
evidence into effective public action.
    And while we wait, children and elderly people develop 
preventable cancers, toddlers get run over in driveways, 
workers are debilitated by respiratory diseases, and the planet 
warms.
    My testimony will only focus on one step in the current 
Federal regulatory process: the review of proposed rules by 
OIRA.
    We need to recognize that Federal agencies now take on 
average 4 to 8 years to complete a rule. These rules are based 
on comprehensive scientific reviews of the literature by 
experts and testimony and materials collected from a variety of 
stakeholders, including regulated industries. But centralized 
review by OIRA actually delays the completion of these rules by 
demanding duplicative cost/benefit analyses and by exerting 
behind-the-scenes pressure on agency personnel to change the 
rules, almost always in ways that weaken public health and 
safety protections.
    Current policy established a 90-day deadline for OIRA to 
review new rules and requires it to be transparent about the 
changes that it asks agencies to make, but the deadlines are 
often missed, and transparency is circumvented by informal 
review that can start at the very beginning of the rulemaking 
process.
    So what do we recommend? Once a rule has been formally 
submitted to OIRA for review, a failure to meet the 90-day 
deadline should be considered default approval, and the rule 
should be published. The scope of agency actions that require 
OIRA review should be limited. Congress should stipulate that 
OIRA may not review agency guidance documents, pre-rulemaking 
actions, or rules that are not economically significant. This 
would reduce its caseload and its workload.
    Agencies should not be forced to engage in resource-
intensive exercises about paring back outdated rules. They need 
to be scanning for emerging threats and risks. We have 
increasing numbers of chemicals, new chemicals that are being 
used in industrial processes, new drugs, new medical 
technologies, emerging nanotechnology, more imports in this 
country than we have ever had before. We need our public 
protective agencies to be looking outward and identifying 
emerging risks, not looking backward.
    On transparency, we think OIRA should be required to 
provide copies of pre-and post-review versions of the rule in 
the rulemaking document. They need to provide a description of 
all the substantive changes made to a rule during both the 
informal as well as the formal review process in clear and 
simple language. We need to know what changes are being made by 
entities inside the Executive Office of the President, an 
agency not responsible for the rule, and by individuals who are 
not employed by the executive branch agency, because we do see 
industry influence coming into play at the very end of the 
rulemaking process.
    Finally, we would like to see OIRA be required to provide a 
summary of the subject matter that is discussed at meetings 
with outside groups. In response to Senator Tester's question, 
they do not post summaries of what is being discussed at the 
meeting. They say who is in it, and then they post the 
material, but not what is being discussed. The public has a 
right to know why important public protections are being 
delayed and oftentimes weakened and who is in on those 
decisions.
    Thank you.
    Senator Tester. Thank you very much for your testimony. 
Michelle Sager.

  TESTIMONY OF MICHELLE SAGER,\1\ DIRECTOR, STRATEGIC ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Sager. Chairman Tester, Ranking Member Portman, and 
Senator McCaskill, thank you for inviting me to be with you 
today to talk about some of GAO's prior work, our findings, as 
well as updates on our recommendations. I am pleased to have 
the opportunity to discuss these important Federal rulemaking 
process issues.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Sager appears in the Appendix on 
page 104.
---------------------------------------------------------------------------
    One common theme that has repeatedly emerged in our body of 
work is the importance of transparency in the rulemaking 
process. Drawing on that body of work, my remarks today will 
focus on three key topics: first, agencies' retrospective 
reviews of their rules; second, the transparency of the 
regulatory review process; and then, third, a brief mention of 
some additional challenges and opportunities for increasing 
public participation as well as knowledge of the rulemaking 
process to outside parties.
    So, first, with regard to retrospective regulatory reviews, 
in 2007 we found that agencies were actually conducting many 
more of these reviews than was readily apparent to the public. 
We also found that reporting on the outcomes of these reviews 
was often lacking. Agencies reported that most of their 
retrospective reviews were actually conducted so that they 
could get a better sense of the effectiveness of their existing 
regulations. Agencies also told us that their retrospective 
reviews, their discretionary reviews more often resulted in 
changes than their mandatory reviews, which most often resulted 
in no changes.
    We made seven recommendations to OMB in that report in 
2007, and OMB acted upon those recommendations. In addition, 
the Administration addressed our recommendations through 
additional guidance to agencies, asking them to plan for and 
conduct retrospective analyses as well as to establish plans 
for how they would conduct these analyses.
    We are currently completing additional work at the request 
of Senators Johnson and Warner, and this forthcoming report 
will look at more recent updates on the retrospective review 
process, factors that either facilitate or impede these 
analyses, as well as the extent to which agencies are making a 
connection between their retrospective regulatory reviews and 
their agency priority goals.
    I would now like to shift topics and move from 
retrospective reviews to the transparency of the regulatory 
review process.
    In a series of products between 1996 and 2009, we 
consistently found that OIRA's reviews of agencies' draft rules 
often did result in changes, but the transparency and 
documentation of those changes resulting from the review could 
definitely be improved.
    To date, OIRA has implemented only one of these 
recommendations, the recommendation that we heard about 
previously, to post information about the meetings with outside 
parties. We continue to believe that our past recommendations 
still have merit and that, if implemented, they would improve 
the effectiveness and the transparency of the rulemaking 
process.
    Third, I would like to briefly mention two additional 
recent GAO reports that identify progress made in facilitating 
transparency and public participation as well as additional 
opportunities for improvement. These reports are summarized in 
greater detail in my written statement that will be entered for 
the record, but in brief, the first of these reports in 2012 
found that agencies frequently cited what is known as the good 
cause exception in publishing final rules without Notices of 
Proposed Rulemaking. And, in addition, in 2013 for the first 
time we reviewed agencies' international regulatory cooperation 
efforts. Both of these reports also contained additional 
recommendations to OMB.
    In conclusion, as you all know, agencies issue thousands of 
rules every year that affect numerous aspects of all of our 
lives as citizens as well as consumers. The rulemaking process 
must balance the public's right to be informed and involved 
with the agencies and OMB's need to efficiently and effectively 
implement their missions. The recommendations that I discussed 
in my statement today intend to facilitate this balancing act.
    Mr. Chairman, this concludes my prepared statement. Again, 
I thank you for the opportunity to appear before you today, and 
I look forward to any questions you and other members may have.
    Senator Tester. Thank you for your testimony, Ms. Sager, 
and thank you, everybody, for your individual testimony.
    I am going to turn to Senator Portman at this point in 
time, and he can rock and fire.
    Senator Portman. Great. Thank you, Chairman. I appreciate 
it. And, Ms. Sager and Ms. McFate and Ambassador Gray, I 
appreciate your testimony and the time you have put into this. 
We had a great discussion earlier about the Permitting Act, the 
Independent Agencies Act, Regulatory Relief Act, which is--the 
Regulatory Accountability Act, and I just have a general 
question, if I could, for you, Boyden, and that has to do with 
the comment you made in your testimony about procedural reform 
versus substantive reforms. And you said in your testimony, and 
I appreciate this, that you do support the regulatory relief 
efforts, and you have been part of helping us put together 
things that make sense here for looking at regulations 
prospectively. But you also make the point that while 
procedural reforms are critical to cleaning up the regulatory 
process, you say equally important are substantive reforms to 
underlying agency statutes to rein in delegated regulatory 
authority and limit burdensome overreach.
    You talk about the 1987 act where Congress repealed the 
power plant and fuel uses prohibition against power companies 
using natural gas, which is very timely in my State of Ohio. 
There are few folks in Youngstown, Ohio, who are happy that 
Congress took that action, and across eastern Ohio.
    But what are some other examples of regulations today that 
you think should be addressed through a substantive 
congressional action to preserve jobs and grow the economy?
    Mr. Gray. Well, the reason I mentioned the much feared, 
maybe little known PSD permitting program is because that is 
something that stems from the underlying Clean Air Act statute 
itself. And the Supreme Court heard argument last week--it may 
throw it out--but the Clean Air Act is one example of where it 
has been around for a long time and has not been actually 
revised since 1990. It is hard for the Environment and Public 
Works Committee to open it up. That is why I suggested a joint 
committee for statutory review.
    But the Clean Air Act is one place where I would certainly 
start, and I could get into a discussion of that which would 
take the rest of the afternoon, and so I will stop with just 
the Clean Air Act. But that one provision for dealing with the 
permitting is absolutely ripe for congressional revisiting.
    Senator Portman. On the permitting side, Senator McCaskill 
helped put this together, and she is going to join us here 
again in a second, but you talked about the fact that Senator 
King's testimony that the current approach the government is 
taking is holding back our economy, stifling job growth, I 
think that is clearly true when you look at where the United 
States has fallen, again, relative to other countries. And it 
is a global economy, and just the fact that it is tough to find 
investors for some of these projects, there is so much 
uncertainty, and sometimes certainty, as to the length of time.
    You said that there are myriad other examples in addition 
to Cape Wind that do not earn such equivalent public notice. I 
mentioned this American Municipal Power (AMP) hydro plant on 
the Ohio River earlier, but I could also mention a gas 
processing facility in Harrison County. It was delayed because 
of an archaeological find that was over a mile away. And it 
caused a significant increase in the cost because they had to 
push it into the winter months, and so on, a country road that 
more than doubled in cost because a Federal Highway 
Administration (FHWA) permitting process resulted in 6 months 
of delays; a wind turbine project in Logan County, they ended 
up canceling that because of the delays.
    So this is just in my State, but do you have other examples 
of that? And what do you think it will take Congress to sort of 
get notice of this? And how do we educate people as to what the 
permitting process is resulting in, in terms of jobs? Boyden, 
you are still up.
    Mr. Gray. So your question is: What does the permitting do?
    Senator Portman. Yes, other examples of that and how do we 
better educate people as to what permitting delays and costs 
result in terms of jobs.
    Mr. Gray. Well, my answer is sort of like Senator King's 
response, that the real harm is what you do not know, which is 
the projects that never got off the ground, the projects that 
you referred to, you cannot get an investor. That is impossible 
to measure. That is why permitting is so insidious.
    I remember the detail that the Southern Company executive 
gave, talking about one of the biggest power plants they have, 
which I do not think is in Ohio but it is in the Midwest 
somewhere, not in the South. They were able to get it permitted 
in 6 months. They cannot get anything permitted in 6 years 
today. And that would be for trying to get a wind project going 
or a solar project going, something that would be extremely 
clean in terms of the environment, or a natural gas project, 
which is much cleaner than coal.
    So even things that are supposed to be cleaner get caught 
up in this permitting, and that does not make any sense. But to 
put a money value on it is impossible, and the metric that I 
think is the most important is the one you used. You see these 
international rankings where the United States has fallen back 
to 34th, used in one survey. That is terrifying, really. This 
country should be No. 1 or No. 2. And there is no way to put a 
dollar value that I know of on projects that do not even get 
started.
    Senator Portman. Yes. Well, thank you.
    Thank you, Chairman. I have to run to my next one I am late 
for, but I appreciate all the testimony and will look forward 
to having some written questions to you all, if that is OK, and 
getting some responses. Thank you.
    Senator Tester. Thank you, Senator Portman.
    Once again I appreciate the testimony by each and every one 
of you today. I am going to start with you, Katherine. You are 
an advocate for maintaining the 90-day review mandate. In fact, 
you said in your testimony that if they did not meet it, it 
would be a default approval.
    Ambassador Gray talked about the fact that they had 90 
people working in OIRA in 1981 and its down to 45 now. What is 
your feeling about their staffing? Do you think it is adequate? 
Do you think they need more folks?
    Ms. McFate. I think it is not adequate for what they are 
trying to do, and they need to stop trying to do so much. If 
you took just that--if they only looked at economically 
significant rules and we actually took that $100 million mark 
in 1978 and did it as a percentage of the economy today, it 
would be rules that had a cost of more than $660 million in an 
economy the size of ours today.
    So I think that there are things that they are trying to do 
that they should stop trying to do, and if they did, then they 
would be able to meet their deadlines better.
    Senator Tester. OK. Ambassador Gray, whenever you talk 
about changing environmental and judicial review, that always 
brings up all sorts of folks that are concerned about it, and 
depending on where it is done, my concerns, too. You have been 
around the horn a few times. Do you see this---if we were to 
change environmental and judicial review, could it lead to more 
litigation? Or do you see it differently?
    Mr. Gray. Well, it might lead to more litigation, but 
remember, we have been through this big debate just recently 
about the workload of the D.C. Circuit, which before the 
addition of the last three judges had the lowest caseload by 
far of any circuit court in the country. So I do not think 
increasing the workload of that court, when you have added 
three judges to the lowest workload court already, I do not 
think that is a burden that is going to be insuperable.
    Senator Tester. OK, good. Ms. Sager, your last report on 
regulatory lookback was released in 2007. It appears that the 
Administration has attempted to incorporate many of your 
recommendations such as increased public engagement in its 
current lookback program.
    Today you testified that, if effectively implements, these 
changes will improve transparency, credibility, and 
effectiveness of the retrospective analysis. What challenges to 
implementation do you foresee?
    Ms. Sager. Again, I should mention, as I noted in my 
statement, we will have additional work on this topic coming 
out within the next month or so, which will illuminate some of 
these issues. However, based on publicly available information, 
certainly we expect some of the same issues that we found in 
2007 to remain true today, in part due to some of the 
challenges that we have already discussed, which are fewer 
resources to conduct the reviews and sometimes overlapping or 
duplicative requirements for multiple types of reviews.
    Having said that, agencies are conducting more 
retrospective reviews than is readily apparent often to the 
general public. One of the challenges of conducting those 
reviews is knowing what the actual results of those reviews are 
and what perhaps the cost savings might be. This is in part 
because agencies have different metrics that they are using as 
they come up with costs. They may have different assumptions. 
They may have different time periods that they are using in 
their retrospective reviews. So one common question we get is: 
Can we aggregate this information and come up with a total cost 
savings? And that is difficult to do at best and difficult to 
defend methodologically.
    Senator Tester. And did you just say there is going to be a 
report coming out from GAO?
    Ms. Sager. Yes, we are doing a report at the request of 
Senators Johnson and Warner.
    Senator Tester. And it will be out when?
    Ms. Sager. It should be out in the next month or so.
    Senator Tester. And will it have additional recommendations 
in it?
    Ms. Sager. It most likely will. We are still finalizing our 
review process.
    Senator Tester. OK. You pointed out in your testimony that 
OIRA has only implemented one of the 12 GAO recommendations on 
how OIRA can increase its transparency. Has the Administration 
made any additional progress on transparency?
    Ms. Sager. They have implemented that recommendation. As I 
mentioned, we have additional recommendations in our more----
    Senator Tester. So it is just that one recommendation, that 
is it?
    Ms. Sager. That is the only one that they have implemented, 
and we do update those--we do followup on those recommendations 
every year, if not----
    Senator Tester. OK. So what do you see as the biggest 
obstacle to transparency?
    Ms. Sager. One of the challenges is they are legally 
complying with what they are supposed to do, but certainly the 
public could be better informed, stakeholders could be better 
informed if they did things such as made clear when a rule is 
changed during the review process, what is the substantive 
nature of that change. Sometimes it may not be a substantive 
change. It may just be a typographical error or some minor 
change. But for interested parties to sort through the rule 
that is submitted and then the final rule and determine what 
the nature of that change is, a simple identification of what 
the nature of the substantive change is could go a long way 
toward making that more transparent.
    Senator Tester. So I had asked the question to Mr. 
Shelanski earlier, and Ms. McFate talked about it a little bit, 
and that was discussions ahead of the process, they would issue 
a summary but they did not issue what was discussed, what was 
actually talked about. Is there a problem with that from your 
perspective?
    Ms. Sager. That is not something we have specifically 
looked at. In our prior report, we did recommend that they just 
simply make public who they are meeting with and what the 
nature of that meeting is, and that is something that they have 
taken action on.
    Senator Tester. It appears to me it might be beneficial to 
hear but to be able to read what they discussed.
    Ms. Sager. To understand the substance of the meeting.
    Senator Tester. OK. Well, I want to thank you all once 
again for being here and taking time out of your busy schedule 
and discussing a very important topic, not only to Senator 
Portman, Senator Pryor, Senator McCaskill and myself, but a lot 
of others in the Senate. So I just thank you for your time.
    Let me see here, make sure I get the homework done here. 
The hearing record will remain open for 15 days for any 
additional comments or questions. Thank you again to our 
witnesses.
    This meeting is adjourned.
    [Whereupon, at 4:12 p.m., the Subcommittee was adjourned.]


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