BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2738
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          Date of Hearing:   April 20, 2010

                                 Mary Hayashi, Chair
                 AB 2738 (Niello) - As Introduced:  February 19, 2010
          SUBJECT  :   Regulations: agency statement of reasons.

           SUMMARY  :   Revises current law related to the adoption,  
          amendment, or repeal of regulations by state agencies.   
          Specifically, this bill:  

          1)Requires a state agency, when submitting proposed regulations  
            to the Office of Administrative Law (OAL), to:

        a)   Acknowledge that the imposition of a performance standard is  
               generally the preferred alternative to mandating specific  
               methods of compliance;

        b)   Identify and describe the elements of a regulation that  
               require, or may require through at least one alternative  
               method of compliance, the use of specific technologies,  
               equipment, actions, or procedures, or other potentially  
               proprietary compliance scheme, methodology, or process.

        c)   Provide a justification for departing from the acknowledged  
               preference of imposing performance standards and a detailed  
               specification as to why certain technologies, equipment,  
               actions, or procedures are required to meet the goals of  
               the regulation, instead of imposing a performance standard.

          2)Delete the requirement, for a regulation that mandates the use  
            of specific technologies or equipment or prescribe specific  
            actions or procedures, that the imposition of performance  
            standards be considered as an alternative.

           EXISTING LAW  :

          1)Establishes requirements for the adoption, publication,  
            review, and implementation of regulations by state agencies,  
            under the Administrative Procedure Act (APA).

          2)Requires a state agency to submit to the OAL an initial  
            statement of reasons for proposing the adoption, amendment,  


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            repeal of a regulation that includes a description of  
            reasonable alternatives to the regulation.

          3)Requires, for a regulation that would mandate the use of  
            specific technologies or equipment or prescribe specific  
            actions or procedures, that the imposition of performance  
            standards be considered as an alternative.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           Purpose of this bill  .  According to the author's office, "AB  
          2738 would improve on current law by requiring greater  
          justification, transparency, and specificity when an agency  
          promulgates regulations that mandate the use of a specific  

          "During the rulemaking process, a state agency is required to  
          prepare an Initial Statement of Reasons (ISOR) whenever it  
          proposes to create, repeal or amend a regulation.  (Govt. Code,  
          11346.2(b))  An ISOR describes the basis of the regulation, the  
          purpose of the rule, how it is intended to be implemented and  
          the data on which the public agency relied to develop the  
          proposed regulatory change.  Importantly, an ISOR must provide a  
          description of reasonable alternatives to the rule being  

          "AB 2738 would retain the requirements for an agency to review  
          reasonable alternatives, but it would amend the language  
          regarding the consideration of a performance standard as an  

          "AB 2738 would instead require an agency to acknowledge that a  
          performance standard is generally a preferred alternative to a  
          specific technology mandate, specify all ways in which specific  
          technology may be mandated, and provide a detailed justification  
          of why a specific technology is being proposed over the  
          preferred alternative.  As the statutorily defined preferred  
          alternative, a performance standard would still be included in  
          any agency's review of reasonable alternatives, as under current  

           Background  .  The APA governs the adoption of regulations by  
          state agencies for purposes of ensuring that they are clear,  


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          necessary, legally valid, and available to the public.  In  
          seeking adoption of a proposed regulation, state agencies must  
          comply with procedural requirements that include publishing the  
          proposed regulation along with supporting statement of reasons;  
          mailing and publishing a notice of the proposed action 45 days  
          before a hearing or before the close of the public comment   
          period; and submitting a final statement to OAL which summarizes  
          and responds to all objections, recommendations, and proposed  
          alternatives that were raised during the public comment period.   
          The OAL is then required to approve or reject the proposed  
          regulation within 30 days.
          More specifically, the APA requires state agencies to justify  
          their proposed regulations by evaluating the technical and  
          empirical evidence that supports the proposed regulation in  
          comparison to reasonable alternatives, and specifically requires  
          specific supporting evaluation and documentation supporting a  
          proposed regulation that requires the use of a specific  
          technology or which could have a negative impact on business.

           Previous legislation  .  AB 2118 (Villines) of 2008 prohibited  
          state agencies from adopting regulations requiring the use of a  
          specific technology unless it has been operational and proven  
          effective for more than two years, or would place an undue  
          burden on business on an annual basis and result in a  
          significant loss of jobs.  The bill was held in the Assembly  
          Business and Professions Committee.


          American Council of Engineering Companies of California
          California Board of Accountancy
          California Business Properties Association
          California Chamber of Commerce
          California Manufacturers & Technology Association
          California Retailers Association
          Pacific Merchant Shipping Association (PMSA)
          Western Propane Gas Association

          None on file.


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           Analysis Prepared by  :    Rebecca May / B.,P. & C.P. / (916)