Increasing Agency Use of Declaratory Orders

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Legal scholar believes that declaratory orders can improve the value of agency advice.

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Regulation sometimes leaves businesses with as many questions as answers. Does a project fall within a given agency’s regulatory scheme? If it does, then what exactly does that regulation require businesses to do – and at what cost? These uncertainties may well even discourage investment and stifle the economy.

To alleviate these concerns, a committee of the Administrative Conference of the United States (ACUS) is considering recommendations that agencies increase their use of declaratory orders whenever a regulated party wants to know whether its business practices fall under an agency’s regulatory ambit.

Until now, agencies have largely been reluctant to use declaratory orders because they are legally binding – which makes them subject to judicial review. Instead, agencies choose to offer non-binding forms of advice, which businesses find less useful.

The recommendations under consideration are contained in a report by University of Wyoming College of Law professor Emily S. Bremer, prepared for ACUS, a federal agency charged with advising on ways to improve the governmental process. Bremer favors the usefulness of declaratory orders, concluding that their advantages outweigh the potential downsides arising from their reviewability by courts.

Declaratory orders are attractive to regulated entities because they can alleviate businesses’ lingering questions and fears more effectively than non-binding forms of guidance. Declaratory orders not only provide clear answers to a high-stakes regulatory questions, but they assure regulated parties that they can operate with little risk of agencies changing their minds.

Agencies benefit from issuing declaratory orders as well, according to Bremer’s report. They can significantly reduce or eliminate litigation, and they create a body of precedent that facilitates better-informed policy decisions.

But despite the potential value of declaratory orders, agencies have been reluctant to use them. Just five agencies have formal procedures governing the use of declaratory orders, and just two agencies regularly issue declaratory orders: the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC).

Bremer suggests that declaratory orders should not be viewed as too threatening by agencies. They are narrow in scope, binding only the issuing agency and requesting party, and they apply only to a specific set of facts. Furthermore, agencies can decline to issue declaratory orders with little explanation.

Bremer highlights two developments in the courts that should encourage agencies to use declaratory orders. First, in a reversal of recent trends, courts now hold that declaratory orders need not always be issued through formal hearings. Additionally, courts review binding and non-binding guidance in an increasingly similar manner, eliminating agency incentives to select non-binding forms of advice.

Bremer’s report proceeds to provide guidance and best practices to agencies considering implementing or expanding their use of declaratory orders.

She first suggests that agencies define the scope of their declaratory orders practices. She identifies two primary uses for orders: first, to interpret statutes, regulations, and terms of art; and second, to clarify the subject matter that falls within an agency’s regulatory authority.

Because agencies’ apprehension about subjecting themselves to judicial review might lead to difficulty in drawing the boundaries of declaratory orders practices, Bremer’s report points to well-developed models.

First, the FERC’s regulations and written policies dictate that orders must resolve only narrow and novel legal questions. FERC regulations also list situations for which declaratory orders are appropriate.

Likewise, the Federal Maritime Commission (FMC) does not engage in costly fact-finding before issuing declaratory orders. When the critical facts are unstated, subject to change, or contested, the FMC refuses to issue an order.

Bremer also advises that agencies use declaratory orders occasionally on their own, even when not requested by business. In order to control its own agenda, for example, the FCC issues declaratory orders alongside final rules to show how those rules will apply.

After agencies define the scope of their declaratory orders practices, Bremer recommends that they issue standard written procedures detailing the information that regulated entities must include in a petition for a declaratory order. She encourages agencies to give public notice upon receiving a petition, create a forum for public comments, and release decisions along with a brief explanation.

Bremer was formerly the Research Chief for ACUS. Her report will be discussed by ACUS’s Adjudication Committee at its next meeting on October 20, 2015.