Formal Rulemaking

The federal Administrative Procedures Act (APA) creates two different types of processes for the creation of administrative rules formal rulemaking, which requires a hearing on the record with the presentation of evidence, similar to a courtroom proceeding; and informal rulemaking, which requires notice to the public and the opportunity to comment on the proposed rule. Formal rulemaking typically takes place when specifically required by the statute authorizing the rule. State governments may have their own processes for formal rulemaking. The process established by the APA offers a useful guide to a typical formal rulemaking proceeding.

Formal vs. Informal Rulemaking

Government agencies create new rules and modify, amend, or repeal existing rules through the informal rulemaking process much more often than the formal rulemaking process. The informal rulemaking process first requires notice to the public of the proposed new rule. In some cases, an agency may publish a notice of a planned new rule in order to solicit public input before it has finished drafting the rule. Otherwise, it publishes the proposed rule, along with any relevant commentary, in the Federal Register. States maintain similar publications for state agencies. The public may submit comments on the proposed rule, and the agency may hold public hearings to allow people to comment or object. The agency may then make changes to the rule, or it may codify it as is.

In the formal rulemaking process, the agency must conduct a hearing on the record, at which evidence is presented. An administrative law judge (ALJ), or a panel of judges, makes the final determination regarding the rule. Parties who will be directly affected by the rule are entitled to notice of the hearing, and they may also intervene directly in the proceeding. The ALJ’s decision may be subject to review by a higher federal court.

When Is Formal Rulemaking Required?

Formal rulemaking proceedings often take place because the statute authorizing a new rule requires it. The Supreme Court has interpreted this requirement very narrowly, holding that a formal proceeding is only required when the statute expressly states that rulemaking must take place “on the record.” United States v. Florida East Coast Ry. Co., 410 U.S. 224 (1973).

The APA governs the conduct of all rulemaking proceedings, formal and informal. Congress may provide additional procedural requirements in a specific statute, but courts cannot place additional procedural obligations on administrative agencies. Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, 435 U.S. 519, 546 (1978).

Notice of Hearing

An agency must publish a notice of an upcoming formal rulemaking proceeding in the Federal Register, as well as other publications when appropriate. Persons, including individuals and other legal entities, may be entitled to receive direct notice of a proceeding if the proposed rule directly affects them.

The notice must identify the time and place of the proceeding, and it must describe the subject matter to be reviewed. It must also reference the statute or other legal authority for the proposed rule.

The agency’s notice might be the only communication with interested third parties during the rulemaking process. The APA expressly prohibits ex parte communications between interested third parties and any agency officials involved in the proceeding.

Hearing

The hearing essentially takes the place of the “comment period” stage in the informal rulemaking process. The agency, representatives of the agency, or an ALJ presides over the hearing, which functions similarly to a trial. Presiding agency employees may administer oaths and affirmations, issue subpoenas for evidence and witnesses, rule on evidentiary and procedural matters, hold settlement conferences, order parties to submit to alternative dispute resolution, and make final decisions regarding the rule.

Decision

The decision of the ALJ or agency employee typically becomes the final rule, codified in the Code of Federal Regulations.