BILL ANALYSIS
Bill No: AB
2738
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 2738 Author: Niello
As Introduced: February 19, 2010
Hearing Date: June 22, 2010
Consultant: Art Terzakis
SUBJECT
Regulations: agency statement of reasons
DESCRIPTION
AB 2738 establishes a performance standards preference in
the rulemaking process (Administrative Procedure Act) and
requires justification for a technology-specific
regulation. Specifically, this measure:
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; and,
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
AB 2738 (Niello) continued
Page 2
standard.
2) Deletes an existing provision of law that stipulates,
in the case of a regulation that would mandate the use of
specific technologies or equipment or prescribe specific
actions or procedures, the performance standards must be
considered as an alternative.
EXISTING LAW
Existing law, the Administrative Procedure Act, governs the
procedure for the adoption, amendment, or repeal of
regulations by state agencies and for the review of those
regulatory actions by the Office of Administrative Law
(OAL).
Existing law requires an agency to submit to the office,
among other things, an initial statement of reasons for
proposing the adoption, amendment, or repeal of a
regulation that includes, among other things, a description
of reasonable alternatives to the regulation. Existing law
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.
BACKGROUND
Administrative Procedures Act (APA): The APA governs the
adoption of regulations by state agencies for purposes of
ensuring that they are clear, 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 the
Office of Administrative Law (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 related to this measure, the APA
requires, for a regulation that would mandate the use of
AB 2738 (Niello) continued
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specific technologies or equipment or prescribe specific
actions or procedures, that the imposition of performance
standards be considered as an alternative.
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 technology."
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.
[Government Code Section 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.
An ISOR must also provide a description of reasonable
alternatives to the rule being proposed.
This measure would retain the requirements for an agency to
review reasonable alternatives, but it would delete the
language regarding the consideration of a performance
standard as an alternative and instead, would: (a) require
an agency to acknowledge that a performance standard is
generally a preferred alternative to a specific technology
mandate; (b) specify all ways in which specific technology
may be mandated; and, (c) provide a detailed justification
of why a specific technology is being proposed over the
preferred alternative. The author's office notes that as
the statutorily defined preferred alternative, a
performance standard would still be included in any
agency's review of reasonable alternatives, as under
current law.
Arguments in Support: The sponsor of this measure, the
Pacific Merchant Shipping Association (PMSA), contends that
the pressure to regulate to technology specification is
acknowledged and discouraged in the APA Act which requires
the consideration of a performance standard as an
alternative to specific technology. PMSA writes, "There is
always the temptation to become overly prescriptive, and
regulators often find themselves becoming an arbiter of
which specific technologies can achieve some of the goals
of the rulemaking. However, by not setting rules based on
performance standards, regulators can undervalue the
incentive of the regulated communities to comply in the
AB 2738 (Niello) continued
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most cost-effective, innovative, competitive and,
ironically, technologically-friendly manner possible."
PMSA states that this measure "simply seeks to strengthen
existing law with the promotion of rulemaking based on
performance standards and requiring agencies to justify any
departure from this preference."
Arguments in Opposition: The California Department of
Insurance is opposed to this measure in its current form.
The department notes that all the regulations it
promulgates require specific actions and procedures. For
example, something as simple as a licensing application
regulation necessarily requires applicants to follow a
certain procedure. The department states that it
promulgates approximately 10-20 sets of regulations
annually, some of which are quite lengthy and highly
complex. [For example, the department's regulations for
prior approval of insurance rates under Proposition 103 can
run to hundreds and even thousands of pages of actuarial
detail.]
Currently, the APA requires the department to state in the
ISOR that the agency has considered performance standards
as an alternative and explain why a performance standard in
the particular context at hand would be impracticable. The
department claims that AB 2738 would double, at minimum,
the work it has to do in the ISOR, and thus would have a
significant fiscal impact on the department. The
department believes this measure has value in other
regulatory contexts but it does not add much to benefit the
public if applied as is to the department's regulations.
The department has offered suggested amendments to the
author's office to resolve this problem - but that language
has been rejected.
PRIOR/RELATED LEGISLATION
SB 1351 (Wright) 2009-10 Session. Would require agencies
when adopting regulations to affirm the availability of
required new technologies and to include implementation
schedules, procedures, and forms, necessary for compliance
in the proposed regulation. If this is not possible at the
time of the adoption of the regulation than enforcement of
the regulation will be delayed for six months following
notice of the availability of the new technology or other
AB 2738 (Niello) continued
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implementation tools. (Pending in Assembly policy
committee)
AB 2118 (Villines) 2007-08 Session. Would have 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. (Failed
passage in Assembly policy committee)
SUPPORT: As of June 18, 2010:
Pacific Merchant Shipping Association (sponsor)
American Council of Engineering Companies of California
California Board of Accountancy
SUPPORT: (continued)
California Business Properties Association
California Chamber of Commerce
California Manufacturers & Technology Association
California Retailers Association
Western Propane Gas Association
OPPOSE: As of June 18, 2010:
California Department of Insurance
DUAL REFERRAL: Senate Committee on Rules
FISCAL COMMITTEE: Senate Appropriations Committee
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