ADMINISTRATIVE RULES REVIEW - BACKGROUND MEMORANDUM

NORTH DAKOTA ADMINISTRATIVE CODE

The North Dakota Administrative Code, published by the Legislative Council office pursuant to North Dakota Century Code (NDCC) Section 28-32-03.2, contains all rules adopted by administrative agencies subject to NDCC Chapter 28-32 (the Administrative Agencies Practice Act). The Administrative Code consists of 116 titles. Eighty-nine titles contain rules of administrative agencies. The rules of the Dairy Promotion Commission and the Parks and Recreation Department are voluntarily published in the Administrative Code, although these agencies are excluded from the definition of administrative agency.

The 1977 Legislative Assembly enacted Section 28-32-03.1, which requires the Legislative Council to compile and publish the North Dakota Administrative Code. Administrative Code supplements are published the month after rules are filed with the Legislative Council office for publication. Prior to 1977, agencies were authorized to adopt administrative rules but there was no compilation or central source for administrative rules. Except for May 1979; March 1981; August 1982; April 1983; November 1984; May, August, and October 1985; February 1987; February 1989; and July 1999, a supplement has been published every month since the initial publication of the Administrative Code on July 1, 1978.

Although rules differ in length and complexity, comparison of the number of administrative rules sections affected during biennial periods is one method of comparing the volume of administrative rules reviewed by the Administrative Rules Committee since its creation in 1979. The following table shows the number of sections of the North Dakota Administrative Code amended, repealed, created, superseded, reserved, or redesignated during each identified time period:

For committee review of rules, the Legislative Council staff prepares an Administrative Rules Committee (ARC) supplement containing all rules changes submitted since the previous committee meeting. The supplement is prepared in a style similar to bill drafts, e.g., changes are indicated by overstrike and underscore. The administrative rules supplements for the period November 1996 through October 1998 consisted of 4,123 pages of rules changes. This compares with 3,809 pages of rules changes during the November 1992-October 1994 biennial period and 3,140 pages of rules considered by the committee during the November 1994-October 1996 biennial period.

The Administrative Code is distributed free to each county auditor, Supreme Court justice, district court judge, and to specific state agencies as required by Section 28-32-03.2. The Legislative Council is required by Section 28-32-03.2 to establish prices for paid subscriptions to the North Dakota Administrative Code. Effective July 1, 1999, prices for paid subscriptions are $440 for the initial code and $250 per year for supplements.

The numbering for the Administrative Code is similar to the numbering used for the North Dakota Century Code. However, while Century Code sections are designated by numbers having three parts separated by hyphens, Administrative Code section numbers consist of four parts--the first part designates the agency (title); the second part designates the major activity or division within the agency (article); the third part designates the subject within the major activity (chapter); and the fourth part designates the rule number (section).

STATUTORY PROVISIONS FOR RULES REVIEW

The 1979 Legislative Assembly enacted the statutes providing for legislative review of administrative rules.

North Dakota Century Code Section 54-35-02.5 directs the Legislative Council to appoint biennially an Administrative Rules Committee and to designate the chairman of the committee. The committee is to operate according to the statutes and procedures governing the operation of Legislative Council interim committees. However, because the committee is established by statute, it is not discharged upon making its report to the Legislative Council at the end of the interim, and the committee could be called to meet at any time, including during a legislative session.

Section 54-35-02.5 provides that it is the standing duty of the committee to review administrative rules adopted under Chapter 28-32. Section 54-35-02.5 requires the committee membership to include at least one member from each standing committee of the House of Representatives or Senate in the most recently completed regular legislative session.

The 1981 Legislative Assembly enacted Section 28-32-03.3, authorizing the Administrative Rules Committee to make formal objections to agency rules. If the committee objects to a rule because the committee determines it to be unreasonable, arbitrary, capricious, or beyond the authority delegated to the adopting agency, the committee may file that objection in certified form in the Legislative Council office. The objection must contain a concise statement of the committee's reasons for its action. The Legislative Council office is to transmit a copy of the objection to the agency adopting the rule in question. The Legislative Council office is also to publish the objection in the next issue of the Administrative Code supplement. Within 14 days after the filing of an objection, the adopting agency is to respond in writing to the committee. After receipt of the response, the committee may withdraw or modify its objection. After the filing of a committee objection, the burden of persuasion is upon the agency in any action for judicial review or for enforcement of the rule to establish that the rule is within the procedural and substantive authority delegated to the agency. If the agency fails to meet its burden of persuasion, the court is to declare the rule invalid and judgment is to be rendered against the agency for court costs, including a reasonable attorney's fee.

Section 28-32-03.3 was amended by 1995 House Bill No. 1284 to expand the authority of the Administrative Rules Committee in reviewing rules. The amendment allows the committee to find that all or any portion of a rule is void if the committee makes the specific finding that there is:

1. An absence of statutory authority.
2. An emergency relating to public health, safety, or welfare.
3. A failure to comply with express legislative intent or to substantially meet the procedural requirements of Chapter 28-32 regarding adoption of the rule.
4. A conflict with state law.
5. Arbitrariness and capriciousness.
6. A failure to make a written record of its consideration or written and oral submissions respecting the rule during the hearing process and comment period.

Section 28-32-03.3 allows the committee to find a rule void if the rule is initially considered by the committee within 90 days after the date of the Administrative Code supplement in which the rule change appears. An exception is that for rules appearing in the Administrative Code supplement during the period from November 1 through May 1 encompassing a regular session of the Legislative Assembly, the committee is not limited to 90 days to initially consider a rule but may initially consider the rule at the first meeting of the committee following the regular session of the Legislative Assembly. The committee may carry consideration of a rule to one subsequent committee meeting for purposes of the decision on whether to void a rule. The committee recommended this change in 1997 legislation to avoid the need for making a decision on whether to void a rule after consideration at only one committee meeting.

If the Administrative Rules Committee finds a rule to be void, the office of the Legislative Council is to provide written notice of the finding to the adopting agency and to the chairman of the Legislative Council. Within 14 days after receipt of the notice, the adopting agency may file a petition with the chairman of the Legislative Council for review by the Legislative Council of the decision of the committee. If the adopting agency does not file a petition for review, the rule becomes void on the fifteenth day after receiving the notice from the office of the Legislative Council to the adopting agency. If within 60 days after receipt of the petition from the adopting agency the Legislative Council has not disapproved the finding of the Administrative Rules Committee, the rule is void.

Section 28-32-03.3 allows a rule change to be made after consideration of rules by the Administrative Rules Committee if the agency and committee agree that the rule change is necessary to address any of the considerations for which the committee may find a rule to be void. This allows an agency to change an administrative rule when the committee expresses concerns, and the agency is not required to commence a new rulemaking proceeding. If a rule change is agreed to by the Administrative Rules Committee and the agency, it must be reconsidered at a subsequent Administrative Rules Committee meeting, and public comment on the agreed rule change must be allowed.

Because the Legislative Assembly recognized that there were constitutional questions about the Administrative Rules Committee voiding rules, 1995 House Bill No. 1284 provided that if the North Dakota Supreme Court rules that the authority to void rules is unconstitutional, an alternative amendment to Section 28-32-03.3 will take effect. The alternative amendment is the same in all respects as the amendment allowing the committee to find rules void except that under the alternative amendment the committee may not find a rule to be void but may suspend a rule or portion of a rule. The effect of a suspension is that the rule becomes ineffective temporarily and will become permanently ineffective unless it is ratified by both houses of the Legislative Assembly during the next legislative session. The amendment requires the agency seeking ratification of a suspended rule to introduce a bill for that purpose. The authority of the Legislative Council to reverse the decision of the committee also applies in the case of a suspension of a rule.

The Legislative Council has assigned the committee the responsibility under Sections 28-32-02 and 28-32-15 to approve extensions of time for administrative agencies to adopt rules, establish a procedure to distribute copies of administrative agency filings of notice of proposed rulemaking, and receive notice of appeal of an administrative agency's rulemaking action.

RULEMAKING PROCEDURES

North Dakota Century Code Section 28-32-01(2) defines administrative agency as:

The only change to the definition of administrative agency under Section 28-32-01(2) made in 1999 resulted from passage of Senate Bill No. 2110. The bill created a risk management motor vehicle accident review board (NDCC Section 32-12.2-14) to be established by the director of the Office of Management and Budget to review accidents involving state vehicles operated by state employees. The amendment to the definition of administrative agency allows the Office of Management and Budget to adopt administrative rules relating to activities of the board.

Section 28-32-01(11) defines a rule as:

Subsections 2, 4, and 5 of Section 28-32-02 provide:

2. Any rule change, including a creation, amendment, or repeal, made to implement a statutory change must be adopted and filed with the office of the legislative council within nine months of the effective date of the statutory change. If an agency needs additional time for the rule change, a request for additional time must be made to the legislative council. The legislative council may extend the time within which the agency must adopt the rule change if the request by the agency is supported by evidence that the agency needs more time through no deliberate fault of its own.
4. The agency's full notice of the proposed adoption, amendment, or repeal of a rule must include a short, specific explanation of the proposed rule and the purpose of the proposed rule, a determination of whether the proposed rulemaking is expected to have an impact on the regulated community in excess of fifty thousand dollars, identify at least one location where interested persons may review the text of the proposed rule, provide the address to which written data, views, or arguments concerning the proposed rule may be sent, provide a phone number at which a copy of the rules and regulatory analysis may be requested, and, in the case of a substantive rule, provide the time and place set for each oral hearing. The agency's full notice must be filed with the office of the legislative council, and the agency shall request publication of an abbreviated newspaper publication notice at least once in each official county newspaper published in this state. The notice filed with the office of the Legislative Council must be accompanied by a copy of the proposed rules. The abbreviated newspaper publication of notice must be in a display-type format with a minimum width of one column of approximately two inches [5.08 centimeters] and a depth of from three inches [7.62 centimeters] to four inches [10.16 centimeters] with a headline describing the general topic of the proposed rules. The notice must also include the address and telephone number to use to obtain a copy of the proposed rules or to submit written comments, and the location, date, and time of the public hearing on the rules. The agency shall mail a copy of the agency's full notice to each person who has made a timely request to the agency for a mailed copy of the notice. The agency may mail or otherwise provide a copy of the agency's full notice to any person who is likely to be an interested person. The agency shall mail or deliver a copy of the rules to any person requesting a copy. The agency may charge for the actual cost of providing copies of the proposed rule. At least thirty days must elapse between the later of the date of the publication of the notice or the date the legislative council mails copies of an agency's notice and the date of the hearing. The thirty-day period begins on the first business day of the month in which the notices must be mailed or on the date of the publication, whichever is later. Subject to subsection 5, notices filed on or before the last calendar day of the preceding month must be mailed by the legislative council on the first business day of the following month to any person making a request. The agency shall allow, after the conclusion of any rulemaking hearing, a comment period of not less than thirty days during which data, views, or arguments concerning the proposed rulemaking will be received by the agency and made a part of the rulemaking record to be considered by the agency. In addition to the other notice requirements of this subsection, the superintendent of public instruction shall provide notice of any proposed rulemaking by the superintendent of public instruction to each association with statewide membership whose primary focus is elementary and secondary education issues which has requested to receive notice from the superintendent under this subsection and to the superintendent of each public school district in this state, or the president of the school board for school districts that have no superintendent, at least thirty days before the date of the hearing described in the notice. Notice provided by the superintendent of public instruction under this section must be by first-class mail. However, upon request of a group or person entitled to notice under this section, the superintendent of public instruction shall provide the group or person notice by electronic mail.
5. The legislative council shall establish standard procedures for all agencies to follow in complying with the provisions of subsection 4 and a procedure whereby any person may request and receive mailed copies of all filings made by agencies pursuant to subsection 4. The legislative council may charge for providing copies of the filings.

The provisions of Section 28-32-02(4) were amended by 1999 Senate Bill No. 2027 with regard to publication of notice of agency rulemaking. The bill requires administrative rulemaking notices to be published once in each official county newspaper, rather than twice in each daily newspaper as current law requires. The bill requires publication of a more abbreviated notice than current law and requires a headline showing the general topic, a statement that rules on the topic will be considered, a telephone number to obtain a copy of the proposed rules, and the time and place of the public hearing. Because the bill requires publication in 52 county newspapers rather than nine daily newspapers, it was estimated that notices would be available to more newspaper readers, but the average cost of newspaper publication of notice would increase from approximately $800 to approximately $2,200. The bill is effective for administrative rulemaking notices filed with the office of the Legislative Council after July 31, 1999.

Section 28-32-02(4) was amended by 1999 Senate Bill No. 2219 to require that the rulemaking notice filed with the office of the Legislative Council must be accompanied by a copy of the proposed rules.

Section 28-32-02(4) was amended by 1999 House Bill No. 1365 to provide that in addition to other notice requirements, the Superintendent of Public Instruction is required to provide notice of any proposed rulemaking to each statewide association with a focus on education issues which has requested to receive notice and to the superintendent of each public school district, or the president of the school board if the district has no superintendent. Notice under this provision must be by first-class mail or by electronic mail if requested by the recipient.

Section 28-32-02(5) requires the Legislative Council to establish guidelines for agencies to comply with Section 28-32-02(4). Attached as an appendix is a copy of the guidelines adopted by the committee in October 1996. The committee may wish to update these guidelines in light of 1999 amendments to the statutory provision. The committee may also wish to consider recommending legislation to incorporate the guidelines in statute.

Section 28-32-02(6) allows an agency to adopt rules on an emergency basis because of imminent peril to the public health, safety, or welfare; because a delay is likely to cause a loss of revenues appropriated to support a duty imposed by law upon the agency; or when reasonably necessary to avoid a delay in implementing an appropriations measure. An emergency rule may be declared effective no earlier than the date of filing notice of rulemaking with the Legislative Council. An emergency rule becomes ineffective if it is not adopted as a final rule within 180 days after its declared effective date.

Section 28-32-02(7) requires review by the Attorney General of all administrative rules and provides that the Attorney General may not approve a rule as to legality when the rule exceeds the statutory authority of the agency, the rule is written in a manner that is not concise or easily understandable, or procedural requirements for adopting the rule are not substantially met.

The Administrative Rules Committee has set the annual charge for providing copies of the filings of notice of proposed rulemaking at $50. As of June 1, 1997, there were 31 paid subscribers to this service. As of June 1, 1999, there were 22 paid subscribers to this service. Some of the reduction in paid subscriptions may be attributable to the fact that notices were made available on the legislative branch Web page beginning in 1998.

Section 28-32-02.5 requires an agency to prepare a written assessment of the constitutional takings implications of a proposed rule that may limit the use of real property. The assessment must:

1. Assess the likelihood that the proposed rule may result in a taking or regulatory taking.
2. Clearly and specifically identify the purpose of the proposed rule.
3. Explain why the proposed rule is necessary to substantially advance that purpose and why no alternative action is available that would achieve the agency's goals while reducing the impact on private property owners.
4. Estimate the potential cost to the government if a court determines that the proposed rule constitutes a taking or regulatory taking.
5. Identify the source of payment within the agency's budget for any compensation that may be ordered.
6. Certify that the benefits of the proposed rule exceed the estimated compensation costs.

Section 65-02-08 provides that until August 1, 1999, the Administrative Rules Committee must approve fee schedules for medical and hospital services proposed for adoption by the Workers Compensation Bureau. This requirement was eliminated effective August 1, 1999, by 1999 House Bill No. 1333, which substituted a requirement for a public hearing before a fee schedule change. The bill provides that the required public hearing is not subject to Chapter 28-32 but the schedule is still to be amended by administrative rule, so a question exists about whether administrative rules notice and procedure requirements of Chapter 28-32 apply to these hearings and resulting rules.

Under Section 28-32-02.5(2), any private landowner affected by a rule that limits the use of the landowner's private real property may file a written request for reconsideration of the application or need for the rule. Within 30 days of receiving the request, the agency must consider the request and provide a written response to the landowner of whether the agency intends to keep the rule in place, modify the rule, or repeal the rule.

Section 23-25-03.3 was created by 1997 House Bill No. 1410 to prohibit the State Department of Health from adopting air quality rules or standards affecting coal conversion and associated facilities, petroleum refineries, or oil and gas production and processing facilities which are more strict than federal rules or standards under the Clean Air Act. The statute also prohibits the department from adopting air quality rules or standards affecting such facilities when there are no corresponding federal rules or standards unless the more strict or additional rules or standards are based on a risk assessment that demonstrates a substantial probability of significant impacts to public health or property, a cost-benefit analysis that affirmatively demonstrates that the benefits of the more stringent or additional state rules and standards will exceed the anticipated costs, and the risk assessment and the cost-benefit analysis is independently peer reviewed by qualified experts selected by the Air Pollution Control Advisory Council.

Section 28-32-02.3 was created in 1995 to prohibit agencies from adopting rules from federal guidelines that are not relevant to state regulatory programs. The law was enacted to assist the State Department of Health in seeking waiver from the Environmental Protection Agency to avoid the necessity of adopting rules that have no application in North Dakota. This statutory provision was amended by 1999 House Bill No. 1025 to provide that any agency may not adopt rules from federal guidelines that are not relevant to state regulatory programs. The amendment also provides that an agency is required to repeal or amend any existing rule adopted from federal guidelines which is not relevant to state regulatory programs.

POSSIBLE RULE REVIEW

During the 1979-80 interim, the Administrative Rules Committee reviewed all rules of the Board of Barber Examiners, the Game and Fish Department, and the Highway Department. During the 1981-82 interim, the Administrative Rules Committee reviewed all rules of the Department of Human Services. Since the 1981-82 interim, preexisting rules have not been reviewed.

During the 1997-98 interim, as rules were scheduled for review, each adopting agency was requested to provide the committee with written information in this format:

1. Whether the rules resulted from statutory changes made by the most recent regular session of the Legislative Assembly.
2. Whether the rules are related to any federal statute or regulation.
3. The rulemaking procedure followed in adopting the rules, e.g., a description of the type of public notice given and the extent of public hearings held on the rules.
4. Whether any person has presented a written or oral concern, objection, or complaint for agency consideration with regard to these rules. If so, describe the concern, objection, or complaint and the response of the agency, including any change made in the rules to address the concern, objection, or complaint. Please summarize the comments of any person who offered comments at the public hearings on these rules.
5. Whether a written request for a regulatory analysis was filed by the Governor or an agency, whether the rule is expected to have an impact on the regulated community in excess of $50,000, and whether a regulatory analysis was issued. Please provide a copy if one was prepared.
6. The approximate cost of giving public notice and holding any hearing on the rules and the approximate cost of staff time used in developing the rules.
7. An explanation of the subject matter of the rules and the reasons for adopting the rules.
8. Whether a constitutional takings assessment was prepared as required by Section 28-32-02.5. Please provide a copy if one was prepared.

North Dakota Century Code Section 54-35-02.6 authorizes the committee to study administrative rules and related statutes to determine whether:

1. Administrative agencies are properly implementing legislative purpose and intent.
2. There is dissatisfaction with administrative rules or with statutes relating to administrative rules.
3. There are unclear or ambiguous statutes relating to administrative rules.

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