2747-S.E [atlas:bill]

AN ACT Relating to regulatory reform; amending RCW 34.05.322, 34.05.370, 34.05.620, 34.05.630, 34.05.640, 76.09.010, 76.09.040, 48.02.060, 48.44.050, 48.46.200, 34.05.328, 34.05.570, 34.05.375, 4.84.350, 48.04.010, and 48.30.010; reenacting and amending RCW 34.05.514; adding new sections to chapter 34.05 RCW; and adding a new section to chapter 43.22 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 34.05.322 and 1995 c 403 s 118 are each amended to read as follows:

(1) For rules implementing statutes enacted after July 23, 1995, an agency, other than one listed in subsection (2) of this section, may not rely solely on the section of law stating a statute's intent or purpose, or on the enabling provisions of the statute establishing the agency, or on any combination of such provisions, for its statutory authority to adopt the rule.

(2) The commissioner of public lands, the department of social and health services, the department of ecology, the department of agriculture, the department of health, the department of revenue, the department of licensing, the department of labor and industries, the employment security department, the forest practices board, the fish and wildlife commission, and the office of the insurance commissioner may not adopt any rule relying solely on the section of law stating a statute's intent or purpose, or on the enabling provisions of the statute establishing the agency, or on any combination of such provisions for its statutory authority to adopt a rule after July 23, 1995.

(3) This section does not apply to rules adopted under chapter 39.12 RCW.

(4) An agency may use the statement of intent or purpose or the agency enabling provisions to interpret ambiguities in a statute's other provisions.

NEW SECTION. Sec. 2. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

(1) At the time it files an adopted rule with the code reviser or within thirty days thereafter, an agency shall place into the rule-making file maintained under RCW 34.05.370 a concise explanatory statement about the rule, identifying (a) the agency's reasons for adopting the rule, and (b) a description of any difference between the text of the proposed rule as published in the register and the text of the rule as adopted, other than editing changes, stating the reasons for change.

(2) Only the reasons contained in the concise explanatory statement may be used by any party as justifications for the adoption of the rule in any proceeding in which its validity is at issue.

Sec. 3. RCW 34.05.370 and 1995 c 403 s 801 are each amended to read as follows:

(1) Each agency shall maintain an official rule-making file for each rule that it (a) proposes by publication in the state register, or (b) adopts. The file and materials incorporated by reference shall be available for public inspection.

(2) The agency rule-making file shall contain all of the following:

(a) Copies of all publications in the state register with respect to the rule or the proceeding upon which the rule is based;

(b) Copies of any portions of the agency's public rule-making docket containing entries relating to the rule or the proceeding on which the rule is based;

(c) All written petitions, requests, submissions, and comments received by the agency and all other written material regarded by the agency as important to adoption of the rule or the proceeding on which the rule is based;

(d) Any official transcript of oral presentations made in the proceeding on which the rule is based or, if not transcribed, any tape recording or stenographic record of them, and any memorandum prepared by a presiding official summarizing the contents of those presentations;

(e) All petitions for exceptions to, amendment of, or repeal or suspension of, the rule;

(f) Citations to data, factual information, studies, or reports on which the agency relies in the adoption of the rule, indicating where such data, factual information, studies, or reports are available for review by the public, but this subsection (2)(f) does not require the agency to include in the rule-making file any data, factual information, studies, or reports gathered pursuant to chapter 19.85 RCW that can be identified to a particular business;

(g) The concise explanatory statement required by RCW 34.05.325(6); and

(h) Any other material placed in the file by the agency.

(3) Internal agency documents are exempt from inclusion in the rule-making file under subsection (2) of this section to the extent they constitute preliminary drafts, notes, recommendations, and intra-agency memoranda in which opinions are expressed or policies formulated or recommended, except that a specific document is not exempt from inclusion when it is publicly cited by an agency in connection with its decision.

(4) Upon judicial review, the file required by this section constitutes the official agency rule-making file with respect to that rule. ((~~Unless otherwise required by another provision of law, the official agency rule-making file need not be the exclusive basis for agency action on that rule.~~)) Except as provided in section 2 of this act or otherwise required by a provision of law, the official agency rule-making file need not constitute the exclusive basis for agency action on that rule or for judicial review thereof.

Sec. 4. RCW 34.05.514 and 1995 c 347 s 113 and 1995 c 292 s 9 are each reenacted and amended to read as follows:

(1) Except as provided in subsections (2) and (3) of this section, proceedings for review under this chapter shall be instituted by paying the fee required under RCW 36.18.020 and filing a petition in the superior court, at the petitioner's option, for (a) Thurston county, (b) the county of the petitioner's residence or principal place of business, or (c) in any county where the property owned by the petitioner and affected by the contested decision is located.

(2) For proceedings involving institutions of higher education, the petition shall be filed either in the county in which the principal office of the institution involved is located or in the county of a branch campus if the action involves such branch.

(3) Proceedings to enjoin application of a rule brought under RCW 34.05.310(1) or 34.05.320(3) shall be instituted by filing a petition in the superior court of the county in which the local government exercises jurisdiction.

Sec. 5. RCW 34.05.620 and 1994 c 249 s 17 are each amended to read as follows:

(1) Whenever a majority of the members of the rules review committee determines that a proposed rule is not within the intent of the legislature as expressed in the statute which the rule implements, or that an agency may not be adopting a proposed rule in accordance with all applicable provisions of law, including ((~~section 4 of this act and~~)) chapter 19.85 RCW, the committee shall give the affected agency written notice of its decision. The notice shall be given at least seven days prior to any hearing scheduled for consideration of or adoption of the proposed rule pursuant to RCW 34.05.320. The notice shall include a statement of the review committee's findings and the reasons therefor. When the agency holds a hearing on the proposed rule, the agency shall consider the review committee's decision.

(2) Within forty-five days of receiving a notice of proposed rule making under RCW 34.05.320, the committee may, by majority vote:

(a) Request an agency that has not prepared a small business economic impact statement regarding the proposed rule under RCW 19.85.030 to prepare and file with the code reviser and the committee such a document before the final adoption of the rule;

(b) Require an agency to make the determinations, prepare the documents, and otherwise fully comply with RCW 34.05.328 (1) through (4).

Sec. 6. RCW 34.05.630 and 1994 c 249 s 18 are each amended to read as follows:

(1) All rules required to be filed pursuant to RCW 34.05.380, and emergency rules adopted pursuant to RCW 34.05.350, are subject to selective review by the legislature.

(2) The rules review committee may review an agency's use of policy statements, guidelines, and issuances that are of general applicability, or their equivalents to determine whether or not an agency has failed to adopt a rule or whether they are within the intent of the legislature as expressed by the governing statute.

(3) If the rules review committee finds by a majority vote of its members: (a) That an existing rule is not within the intent of the legislature as expressed by the statute which the rule implements, (b) that the rule has not been adopted in accordance with all applicable provisions of law, including ((~~section 4 of this act if the rule was adopted after the effective date of section 4 of this act and~~)) chapter 19.85 RCW, (c) that an agency is using a policy statement, guideline, or issuance in place of a rule, or (d) that the policy statement, guideline, or issuance is outside of legislative intent, the agency affected shall be notified of such finding and the reasons therefor.

(4) The committee's notice may:

(a) Recommend that the agency defer the rule-making process until clarification by the legislature of its intent;

(b) Recommend that the agency comply with all applicable laws, including this chapter and chapter 19.85 RCW;

(c) Notify the agency that a policy statement, guideline, or issuance (i) is being used in place of a rule or (ii) is outside legislative intent.

(5)(a) A committee notification under subsection (4)(c)(i) of this section may recommend that the agency adopt the policy statement, guideline, or issuance as a rule in accordance with the procedures of this chapter.

(b) A committee notification under subsection (4)(c)(ii) of this section may recommend that the agency stop using or applying the policy statement, guideline, or issuance.

(c) The agency may continue to use or apply the policy statement, guideline, or issuance pending its review by the agency under this section and RCW 34.05.640.

(6) Within thirty days of the receipt of the rules review committee's notice, the agency shall file notice of a hearing on the rules review committee's finding with the code reviser and mail notice to all persons who have made timely request of the agency for advance notice of its rule-making proceedings as provided in RCW 34.05.320. The agency's notice shall include the rules review committee's findings and reasons therefor, and shall be published in the Washington state register in accordance with the provisions of chapter 34.08 RCW.

((~~(4)~~)) (7) The agency shall consider fully all written and oral submissions regarding (a) whether the rule in question is within the intent of the legislature as expressed by the statute which the rule implements, (b) whether the rule was adopted in accordance with all applicable provisions of law, including ((~~section 4 of this act if the rule was adopted after the effective date of section 4 of this act and~~)) chapter 19.85 RCW, (c) whether the agency is using a policy statement, guideline, or issuance in place of a rule, or (d) whether the policy statement, guideline, or issuance is within the legislative intent.

Sec. 7. RCW 34.05.640 and 1994 c 249 s 19 are each amended to read as follows:

(1) Within seven days of an agency hearing held after notification of the agency by the rules review committee pursuant to RCW 34.05.620 or 34.05.630, the affected agency shall notify the committee of its action on a proposed or existing rule to which the committee objected or on a committee finding of the agency's failure to adopt rules. If the rules review committee determines, by a majority vote of its members, that the agency has failed to provide for the required hearings or notice of its action to the committee, the committee may file notice of its objections, together with a concise statement of the reasons therefor, with the code reviser within thirty days of such determination.

(2) If the rules review committee finds, by a majority vote of its members: (a) That the proposed or existing rule in question has not been modified, amended, withdrawn, or repealed by the agency so as to conform with the intent of the legislature, or (b) that an existing rule was not adopted in accordance with all applicable provisions of law, including ((~~section 4 of this act if the rule was adopted after the effective date of section 4 of this act and~~)) chapter 19.85 RCW, or (c) that the agency is using a policy statement, guideline, or issuance in place of a rule, or that the policy statement, guideline, or issuance is outside of the legislative intent, the rules review committee may, within thirty days from notification by the agency of its action, file with the code reviser notice of its objections together with a concise statement of the reasons therefor. Such notice and statement shall also be provided to the agency by the rules review committee.

(3) If the rules review committee makes an adverse finding under subsection (2) of this section, the committee may, by a majority vote of its members, recommend suspension of an existing rule. Within seven days of such vote the committee shall transmit to the appropriate standing committees of the legislature, the governor, the code reviser, and the agency written notice of its objection and recommended suspension and the concise reasons therefor. Within thirty days of receipt of the notice, the governor shall transmit to the committee, the code reviser, and the agency written approval or disapproval of the recommended suspension. If the suspension is approved by the governor, it is effective from the date of that approval and continues until ninety days after the expiration of the next regular legislative session.

(4) If the governor disapproves the recommendation of the rules review committee to suspend the rule, the transmittal of such decision, along with the findings of the rules review committee, shall be treated by the agency as a petition by the rules review committee to repeal the rule under RCW 34.05.330.

(5) The code reviser shall publish transmittals from the rules review committee or the governor issued pursuant to subsection (1), (2), or (3) of this section in the Washington state register and shall publish in the next supplement and compilation of the Washington Administrative Code a reference to the committee's objection or recommended suspension and the governor's action on it and to the issue of the Washington state register in which the full text thereof appears.

(6) The reference shall be removed from a rule published in the Washington Administrative Code if a subsequent adjudicatory proceeding determines that the rule is within the intent of the legislature or was adopted in accordance with all applicable laws, whichever was the objection of the rules review committee.

Sec. 8. RCW 76.09.010 and 1993 c 3 s 1 are each amended to read as follows:

(1) The legislature hereby finds and declares that the forest land resources are among the most valuable of all resources in the state; that a viable forest products industry is of prime importance to the state's economy; that it is in the public interest for public and private commercial forest lands to be managed consistent with sound policies of natural resource protection; that coincident with maintenance of a viable forest products industry, it is important to afford protection to forest soils, fisheries, wildlife, water quantity and quality, air quality, recreation, and scenic beauty.

(2) The legislature further finds and declares it to be in the public interest of this state to create and maintain through the adoption of this chapter a comprehensive state-wide system of laws and forest practices regulations which will achieve the following purposes and policies:

(a) Afford protection to, promote, foster and encourage timber growth, and require such minimum reforestation of commercial tree species on forest lands as will reasonably utilize the timber growing capacity of the soil following current timber harvest;

(b) Afford protection to forest soils and public resources by utilizing all reasonable methods of technology in conducting forest practices;

(d) Promote efficiency by permitting maximum operating freedom consistent with the other purposes and policies stated herein;

(e) Provide for regulation of forest practices so as to avoid unnecessary duplication in such regulation;

(f) Provide for interagency input and intergovernmental and tribal coordination and cooperation;

(g) Achieve compliance with all applicable requirements of federal and state law with respect to nonpoint sources of water pollution from forest practices;

(h) To consider reasonable land use planning goals and concepts contained in local comprehensive plans and zoning regulations; and

(i) Foster cooperation among managers of public resources, forest landowners, Indian tribes and the citizens of the state.

The authority of the board to adopt forest practices rules is prescribed by this subsection (2) and RCW 76.09.040. The board may not adopt forest practices rules based solely on any other section of law stating a statute's intent or purpose, on the enabling provisions of the statute establishing the agency, or on any combination of such provisions.

(3) The legislature further finds and declares that it is also in the public interest of the state to encourage forest landowners to undertake corrective and remedial action to reduce the impact of mass earth movements and fluvial processes.

(4) The legislature further finds and declares that it is in the public interest that the applicants for state forest practice permits should assist in paying for the cost of review and permitting necessary for the environmental protection of these resources.

Sec. 9. RCW 76.09.040 and 1994 c 264 s 48 are each amended to read as follows:

(1) Where necessary to accomplish the purposes and policies specifically stated in RCW 76.09.010(2), and to implement the provisions of this chapter, the board shall ((~~promulgate~~)) adopt forest practices ((~~regulations~~)) rules pursuant to chapter 34.05 RCW and in accordance with the procedures enumerated in this section that:

(a) Establish minimum standards for forest practices;

(b) Provide procedures for the voluntary development of resource management plans which may be adopted as an alternative to the minimum standards in (a) of this subsection if the plan is consistent with the purposes and policies specifically stated in RCW 76.09.010(2) and the plan meets or exceeds the objectives of the minimum standards;

(d) Establish procedures for the collection and administration of forest practice fees as set forth by this chapter.

Forest practices ((~~regulations~~)) rules pertaining to water quality protection shall be ((~~promulgated~~)) adopted individually by the board and by the department of ecology after they have reached agreement with respect thereto. All other forest practices ((~~regulations~~)) rules shall be ((~~promulgated~~)) adopted by the board.

Forest practices ((~~regulations~~)) rules shall be administered and enforced by the department except as otherwise provided in this chapter. Such ((~~regulations~~)) rules shall be ((~~promulgated~~)) adopted and administered so as to give consideration to all purposes and policies specifically set forth in RCW 76.09.010(2).

((~~(2)~~)) (3) The board shall prepare proposed forest practices ((~~regulations~~)) rules. In addition to any forest practices ((~~regulations~~)) rules relating to water quality protection proposed by the board, the department of ecology shall prepare proposed forest practices ((~~regulations~~)) rules relating to water quality protection.

Prior to initiating the rule making process, the proposed ((~~regulations~~)) rules shall be submitted for review and comments to the department of fish and wildlife and to the counties of the state. After receipt of the proposed forest practices ((~~regulations~~)) rules, the department of fish and wildlife and the counties of the state shall have thirty days in which to review and submit comments to the board, and to the department of ecology with respect to its proposed ((~~regulations~~)) rules relating to water quality protection. After the expiration of such thirty day period the board and the department of ecology shall jointly hold one or more hearings on the proposed ((~~regulations~~)) rules pursuant to chapter 34.05 RCW. At such hearing(s) any county may propose specific forest practices ((~~regulations~~)) rules relating to problems existing within such county. The board and the department of ecology may adopt such proposals if they find the proposals are consistent with the purposes and policies of this chapter.

NEW SECTION. Sec. 10. A new section is added to chapter 43.22 RCW to read as follows:

For rules adopted after the effective date of this section, the director of the department of labor and industries may not rely solely on a statute's statement of intent or purpose, on the enabling provisions of the statute establishing the agency, or on any combination of such provisions, for statutory authority to adopt any rule: PROVIDED, That this section shall not apply to rules adopted pursuant to chapter 39.12 RCW.

Sec. 11. RCW 48.02.060 and 1947 c 79 s .02.06 are each amended to read as follows:

(1) The commissioner shall have the authority expressly conferred upon him or her by or reasonably implied from the provisions of this code.

(2) The commissioner shall execute his or her duties and shall enforce the provisions of this code.

(3) The commissioner may:

(a) Make reasonable rules and regulations for effectuating any provision of this code, except those relating to his or her election, qualifications, or compensation: PROVIDED, That the commissioner may not adopt rules after the effective date of this section that are based solely on this statute, or on a statute's statement of intent or purpose, or on the enabling provisions of the statute establishing the agency, or any combination of such provisions, for statutory authority to adopt any rule, except rules defining or clarifying terms in, or procedures necessary to the implementation of a statute. No such rules and regulations shall be effective prior to their being filed for public inspection in the commissioner's office.

(b) Conduct investigations to determine whether any person has violated any provision of this code.

(c) Conduct examinations, investigations, hearings, in addition to those specifically provided for, useful and proper for the efficient administration of any provision of this code.

Sec. 12. RCW 48.44.050 and 1947 c 268 s 5 are each amended to read as follows:

The insurance commissioner shall make reasonable regulations in aid of the administration of this chapter which may include, but shall not be limited to regulations concerning the maintenance of adequate insurance, bonds, or cash deposits, information required of registrants, and methods of expediting speedy and fair payments to claimants: PROVIDED, That the commissioner may not adopt rules after the effective date of this section that are based solely on this section, a statute's statement of intent or purpose, or on the enabling provisions of the statute establishing the agency, or any combination of such provisions, for statutory authority to adopt any rule, except rules defining or clarifying terms in, or procedures necessary to the implementation of a statute.

Sec. 13. RCW 48.46.200 and 1975 1st ex.s. c 290 s 21 are each amended to read as follows:

The commissioner may adopt, in accordance with the provisions of the administrative procedure act, chapter 34.05 RCW, ((~~promulgate~~)) rules and regulations as necessary or proper to carry out the provisions of this chapter: PROVIDED, That the commissioner may not adopt rules after the effective date of this section that are based solely on this section, a statute's statement of intent or purpose, or on the enabling provisions of the statute establishing the agency, or any combination of such provisions, for statutory authority to adopt any rule, except rules defining or clarifying terms in, or procedures necessary to the implementation of a statute. Nothing in this chapter shall be construed to prohibit the commissioner from requiring changes in procedures previously approved by ((~~him~~)) the commissioner.

Sec. 14. RCW 34.05.328 and 1995 c 403 s 201 are each amended to read as follows:

(1) Before adopting a rule described in subsection (5) of this section, an agency shall:

(a) Clearly state in detail the general goals and specific objectives of the statute that the rule implements;

(b) Determine that the rule is needed to achieve the general goals and specific objectives stated under (a) of this subsection, and analyze alternatives to rule making and the consequences of not adopting the rule;

(c) Determine that the probable benefits of the rule are greater than its probable costs, taking into account both the qualitative and quantitative benefits and costs and the specific directives of the statute being implemented;

(d) Determine, after considering alternative versions of the rule and the analysis required under (b) and (c) of this subsection, that the rule being adopted is the least burdensome alternative for those required to comply with it that will achieve the general goals and specific objectives stated under (a) of this subsection;

(e) Determine that the rule does not require those to whom it applies to take an action that violates requirements of another federal or state law;

(f) Determine that the rule does not impose more stringent performance requirements on private entities than on public entities unless required to do so by federal or state law;

(g) Determine if the rule differs from any federal regulation or statute applicable to the same activity or subject matter and, if so, determine that the difference is justified by the following:

(i) A state statute that explicitly allows the agency to differ from federal standards; or

(ii) Substantial evidence that the difference is necessary to achieve the general goals and specific objectives stated under (a) of this subsection; and

(h) Coordinate the substance of the rule, to the maximum extent practicable, with other federal, state, and local laws applicable to the same activity or subject matter.

(2) In making its determinations pursuant to subsection (1) (b) through (g) of this section, the agency shall place in the rule-making file documentation of sufficient quantity and quality so as to persuade a reasonable person that the determinations are justified.

(3) Before adopting rules described in subsection (5) of this section, an agency shall place in the rule-making file a rule implementation plan for rules filed under each adopting order. The plan shall describe how the agency intends to:

(a) Implement and enforce the rule, including a description of the resources the agency intends to use;

(b) Inform and educate affected persons about the rule;

(d) Evaluate whether the rule achieves the purpose for which it was adopted, including, to the maximum extent practicable, the use of interim milestones to assess progress and the use of objectively measurable outcomes.

(4) After adopting a rule described in subsection (5) of this section regulating the same activity or subject matter as another provision of federal or state law, an agency shall do all of the following:

(a) Provide to the business assistance center a list citing by reference the other federal and state laws that regulate the same activity or subject matter;

(b) Coordinate implementation and enforcement of the rule with the other federal and state entities regulating the same activity or subject matter by making every effort to do one or more of the following:

(i) Deferring to the other entity;

(ii) Designating a lead agency; or

(iii) Entering into an agreement with the other entities specifying how the agency and entities will coordinate implementation and enforcement.

If the agency is unable to comply with this subsection (4)(b), the agency shall report to the legislature pursuant to (c) of this subsection;

(i) The existence of any overlap or duplication of other federal or state laws, any differences from federal law, and any known overlap, duplication, or conflict with local laws; and

(ii) Make recommendations for any legislation that may be necessary to eliminate or mitigate any adverse effects of such overlap, duplication, or difference.

(5)(a) Except as provided in (b) of this subsection, this section applies to:

(i) Significant legislative rules of the departments of ecology, labor and industries, health, revenue, social and health services, and natural resources, the employment security department, the forest practices board, the office of the insurance commissioner, and to the legislative rules of the department of fish and wildlife implementing chapter 75.20 RCW; and

(ii) Any rule of any agency, if this section is voluntarily made applicable to the rule by the agency, or is made applicable to the rule by a majority vote of the joint administrative rules review committee within forty-five days of receiving the notice of proposed rule making under RCW 34.05.320.

(b) This section does not apply to:

(i) Emergency rules adopted under RCW 34.05.350;

(ii) Rules relating only to internal governmental operations that are not subject to violation by a nongovernment party;

(iii) Rules adopting or incorporating by reference without material change federal statutes or regulations, Washington state statutes, rules of other Washington state agencies, shoreline master programs other than those programs governing shorelines of state-wide significance, or, as referenced by Washington state law, national consensus codes that generally establish industry standards, if the material adopted or incorporated regulates the same subject matter and conduct as the adopting or incorporating rule, however, the exemption in this subsection (5)(b)(iii) does not apply if the rule adopted is the rule of another Washington state agency, which rule was not adopted in accordance with this section. Any doubts as to whether this requirement has been met shall be resolved in favor of causing the rules to be subjected to the requirements of this section;

(iv) Rules that only correct typographical errors, make address or name changes, or clarify language of a rule without changing its effect;

(v) Rules the content of which is explicitly and specifically dictated by statute; or

(vi) Rules that set or adjust fees or rates pursuant to legislative standards.

(i) A "procedural rule" is a rule that adopts, amends, or repeals (A) any procedure, practice, or requirement relating to any agency hearings; (B) any filing or related process requirement for making application to an agency for a license or permit; or (C) any policy statement pertaining to the consistent internal operations of an agency.

(ii) An "interpretive rule" is a rule, the violation of which does not subject a person to a penalty or sanction, that sets forth the agency’s interpretation of statutory provisions it administers.

(iii) A "significant legislative rule" is a rule other than a procedural or interpretive rule that (A) adopts substantive provisions of law pursuant to delegated legislative authority, the violation of which subjects a violator of such rule to a penalty or sanction; (B) establishes, alters, or revokes any qualification or standard for the issuance, suspension, or revocation of a license or permit; or (C) adopts a new, or makes significant amendments to, a policy or regulatory program.

(d) In the notice of proposed rule making under RCW 34.05.320, an agency shall state whether this section applies to the proposed rule pursuant to (a)(i) of this subsection, or if the agency will apply this section voluntarily.

(6) By January 31, 1996, and by January 31st of each even-numbered year thereafter, the office of financial management, after consulting with state agencies, counties, and cities, and business, labor, and environmental organizations, shall report to the governor and the legislature regarding the effects of this section on the regulatory system in this state. The report shall document:

(a) The rules proposed to which this section applied and to the extent possible, how compliance with this section affected the substance of the rule, if any, that the agency ultimately adopted;

(b) The costs incurred by state agencies in complying with this section;

(c) Any legal action maintained based upon the alleged failure of any agency to comply with this section, the costs to the state of such action, and the result;

(d) The extent to which this section has adversely affected the capacity of agencies to fulfill their legislatively prescribed mission;

(e) The extent to which this section has improved the acceptability of state rules to those regulated; and

(f) Any other information considered by the office of financial management to be useful in evaluating the effect of this section.

NEW SECTION. Sec. 15. A new section is added to chapter 34.05 RCW under the subchapter heading "Part III" to read as follows:

If an amendment is made to a subsection of an existing significant legislative rule, then the entire section must be processed in accordance with RCW 34.05.328.

Sec. 16. RCW 34.05.570 and 1995 c 403 s 802 are each amended to read as follows:

(1) Generally. Except to the extent that this chapter or another statute provides otherwise:

(a) Except as provided in subsections (2) and (3) of this section, the burden of demonstrating the invalidity of agency action is on the party asserting invalidity;

(b) The validity of agency action shall be determined in accordance with the standards of review provided in this section, as applied to the agency action at the time it was taken;

(c) The court shall make a separate and distinct ruling on each material issue on which the court's decision is based; and

(d) The court shall grant relief only if it determines that a person seeking judicial relief has been substantially prejudiced by the action complained of.

(2) Review of rules. (a) A rule may be reviewed by petition for declaratory judgment filed pursuant to this subsection or in the context of any other review proceeding under this section. In an action challenging the validity of a rule, the agency shall be made a party to the proceeding.

(b) The validity of any rule may be determined upon petition for a declaratory judgment addressed to the superior court of Thurston county, when it appears that the rule, or its threatened application, interferes with or impairs or immediately threatens to interfere with or impair the legal rights or privileges of the petitioner. The burden of demonstrating the validity of any rule is on the agency. The declaratory judgment order may be entered whether or not the petitioner has first requested the agency to pass upon the validity of the rule in question.

(c) In a proceeding involving review of a rule, the court shall declare the rule invalid only if it finds that: The rule violates constitutional provisions; the rule exceeds the statutory authority of the agency; the rule was adopted without compliance with statutory rule-making procedures; or the rule is arbitrary and capricious.

(3) Review of agency orders in adjudicative proceedings. The burden of proof is on the agency to demonstrate that any challenged provision of (a) through (i) of this subsection was not violated. The court shall grant relief from an agency order in an adjudicative proceeding only if it determines that:

(a) The order, or the statute or rule on which the order is based, is in violation of constitutional provisions on its face or as applied;

(b) The order is outside the statutory authority or jurisdiction of the agency conferred by any provision of law;

(c) The agency has engaged in unlawful procedure or decision-making process, or has failed to follow a prescribed procedure;

(d) The agency has erroneously interpreted or applied the law;

(e) The order is not supported by evidence that is substantial when viewed in light of the whole record before the court, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this chapter;

(f) The agency has not decided all issues requiring resolution by the agency;

(g) A motion for disqualification under RCW 34.05.425 or 34.12.050 was made and was improperly denied or, if no motion was made, facts are shown to support the grant of such a motion that were not known and were not reasonably discoverable by the challenging party at the appropriate time for making such a motion;

(h) The order is inconsistent with a rule of the agency unless the agency explains the inconsistency by stating facts and reasons to demonstrate a rational basis for inconsistency; or

(i) The order is arbitrary or capricious.

(4) Review of other agency action.

(a) All agency action not reviewable under subsection (2) or (3) of this section shall be reviewed under this subsection.

(b) A person whose rights are violated by an agency's failure to perform a duty that is required by law to be performed may file a petition for review pursuant to RCW 34.05.514, seeking an order pursuant to this subsection requiring performance. Within twenty days after service of the petition for review, the agency shall file and serve an answer to the petition, made in the same manner as an answer to a complaint in a civil action. The court may hear evidence, pursuant to RCW 34.05.562, on material issues of fact raised by the petition and answer.

(c) Relief for persons aggrieved by the performance of an agency action, including the exercise of discretion, or an action under (b) of this subsection can be granted only if the court determines that the action is:

(i) Unconstitutional;

(ii) Outside the statutory authority of the agency or the authority conferred by a provision of law;

(iii) Arbitrary or capricious; or

(iv) Taken by persons who were not properly constituted as agency officials lawfully entitled to take such action.

Sec. 17. RCW 34.05.375 and 1988 c 288 s 314 are each amended to read as follows:

No rule proposed after July 1, 1989, is valid unless it is adopted in substantial compliance with RCW 34.05.310 through 34.05.395. Inadvertent failure to mail notice of a proposed rule adoption to any person as required by RCW 34.05.320(3) does not invalidate a rule. No action based upon this section may be maintained to contest the validity of any rule unless it is commenced within ((~~two~~)) seven years after the effective date of the rule.

NEW SECTION. Sec. 18. A new section is added to chapter 34.05 RCW to read as follows:

(1) A person may petition an agency requesting that an existing rule be subject to readoption. The office of financial management shall prescribe by rule the format for such petitions and the procedure for their submission, consideration, and disposition and provide a standard form that may be used to petition any agency. Within sixty days after submission of a petition, the agency shall either (a) deny the petition in writing, stating (i) its reasons for the denial, specifically addressing each item listed in subsection (3) of this section and, where appropriate, (ii) the alterative means by which it will address the concerns raised by the petitioner, or (b) initiate the readoption procedure in accordance with this section.

(2) If an agency denies a petition submitted under subsection (1) of this section, the petitioner, within thirty days of the denial, may appeal the denial to the joint administrative rules review committee. Within sixty days after receiving the appeal, the committee shall, by a majority vote of its members, either (a) deny the appeal in writing, stating its reasons for the denial, or (b) direct the agency to initiate the readoption procedure in accordance with this section. The agency shall initiate the readoption procedure by the date specified by the committee.

(3) An agency's written denial under subsection (1) of this section must address each of the following:

(a) Whether the rule is authorized;

(b) Whether the rule is needed;

(d) Whether alternatives to the rule exist that will serve the same purpose at less cost;

(e) Whether the rule applies differently to public and private entities;

(f) Whether the rule serves the purposes for which it was adopted;

(g) Whether the benefits of the rule are greater than its costs;

(h) Whether the rule is clearly and simply stated; and

(i) Whether there is adequate justification if the rule is different than a federal law applicable to the same activity or subject matter.

Persons are encouraged to address each of these issues in their petition to the agency.

(4) For purposes of this section, "readoption" means that the text of the existing rule is submitted under RCW 34.05.320 as a proposed rule and is then subject to the rule-making process set forth in this chapter. However, an agency need not submit a statement of inquiry under RCW 34.05.310 for an existing rule subject to readoption. Unless readopted, an existing rule subject to readoption is automatically repealed one hundred eighty days after publication of the text as a proposed rule in the Washington State Register.

(5) A decision by an agency under subsection (1) of this section to deny a petition for readoption is not subject to judicial review.

(6) The office of financial management shall initiate the rule making required by subsection (1) of this section by July 1, 1996.

NEW SECTION. Sec. 19. A new section is added to chapter 34.05 RCW under the subchapter heading "Part V" to read as follows:

(1) Except as provided in subsection (2) of this section, after December 31, 2000, the following agencies may not rely solely on a statute's statement of intent or purpose or the enabling provisions of the statute establishing the agency, or any combination of such provisions, for the agency's statutory authority to have adopted a rule challenged after December 31, 2000: The commissioner of public lands, the department of social and health services, the department of ecology, the department of agriculture, the department of health, the department of revenue, the department of licensing, the department of labor and industries, the employment security department, the forest practices board, the fish and wildlife commission, and the office of the insurance commissioner.

(2) This section does not apply to rules adopted under chapter 39.12 RCW.

Sec. 20. RCW 4.84.350 and 1995 c 403 s 903 are each amended to read as follows:

(1) Except as otherwise specifically provided by statute, a court shall award a qualified party that prevails in a judicial review of an agency action fees and other expenses, including reasonable attorneys' fees, unless the court finds that the agency action was substantially justified or that circumstances make an award unjust. A qualified party shall be considered to have prevailed if the qualified party obtained relief on a significant issue that achieves some benefit that the qualified party sought.

(2) The amount awarded a qualified party under subsection (1) of this section shall not exceed:

(a) For cases involving rule validity:

(i) Twenty-five thousand dollars for superior court cases; and

(ii) Fifteen thousand dollars for appeals to the court of appeals and the supreme court; and

(b) For cases involving other agency action:

(i) Fifty thousand dollars for superior court cases; and

(ii) Fifteen thousand dollars for appeals to the court of appeals and the supreme court.

(3) Subsection (1) of this section shall not apply unless all parties challenging the agency action are qualified parties. If two or more qualified parties join in an action, the award in total shall not exceed twenty-five thousand dollars. The court, in its discretion, may reduce the amount to be awarded pursuant to subsection (1) of this section, or deny any award, to the extent that a qualified party during the course of the proceedings engaged in conduct that unduly or unreasonably protracted the final resolution of the matter in controversy.

(4) Qualified parties shall receive awards under this section for cases pending July 23, 1995.

Sec. 21. RCW 48.04.010 and 1990 1st ex.s. c 3 s 1 are each amended to read as follows:

(1) The commissioner may hold a hearing for any purpose within the scope of this code as he or she may deem necessary. The commissioner shall hold a hearing:

(a) If required by any provision of this code; or

(b) Upon written demand for a hearing made by any person aggrieved by any act, threatened act, or failure of the commissioner to act, if such failure is deemed an act under any provision of this code, or by any report, promulgation, or order of the commissioner other than an order on a hearing of which such person was given actual notice or at which such person appeared as a party, or order pursuant to the order on such hearing.

(2) Any such demand for a hearing shall specify in what respects such person is so aggrieved and the grounds to be relied upon as basis for the relief to be demanded at the hearing.

(3) Unless a person aggrieved by a written order of the commissioner demands a hearing thereon within ninety days after receiving notice of such order, or in the case of a licensee under Title 48 RCW within ninety days after the commissioner has mailed the order to the licensee at the most recent address shown in the commissioner's licensing records for the licensee, the right to such hearing shall conclusively be deemed to have been waived.

(4) If a hearing is demanded by a licensee whose license has been temporarily suspended pursuant to RCW 48.17.540, the commissioner shall hold such hearing demanded within thirty days after receipt of the demand or within thirty days of the effective date of a temporary license suspension issued after such demand, unless postponed by mutual consent.

(5) Any hearing held pursuant to this section shall be conducted by an administrative law judge unless the person demanding the hearing agrees in writing to have an employee of the commissioner conduct the hearing.

Sec. 22. RCW 48.30.010 and 1985 c 264 s 13 are each amended to read as follows:

(1) No person engaged in the business of insurance shall engage in unfair methods of competition or in unfair or deceptive acts or practices in the conduct of such business as such methods, acts, or practices ((~~are defined pursuant to subsection (2) of this section.~~

~~(2) In addition to such unfair methods and unfair or deceptive acts or practices as~~)) are expressly defined and prohibited by this code((, the commissioner may from time to time by regulation promulgated pursuant to chapter 34.05 RCW, define other methods of competition and other acts and practices in the conduct of such business reasonably found by the commissioner to be unfair or deceptive.

~~(3) No such regulation shall be made effective prior to the expiration of thirty days after the date of the order by which it is promulgated~~)).

((~~(4)~~)) (2) If the commissioner has cause to believe that any person is violating any such ((~~regulation~~)) rule or prohibition of this code, the commissioner may order such person to cease and desist therefrom. The commissioner shall deliver such order to such person direct or mail it to the person by registered mail with return receipt requested. If the person violates the order after expiration of ten days after the cease and desist order has been received by him or her, he or she may be fined by the commissioner a sum not to exceed two hundred and fifty dollars for each violation committed thereafter.

((~~(5)~~)) (3) If any such ((~~regulation~~)) rule or prohibition of this code is violated, the commissioner may take such other or additional action as is permitted under the insurance code for violation of a ((~~regulation~~)) rule or that prohibition.

(4) Any permanent rule that was adopted by the commissioner under the authority of this section as it existed before the effective date of this section, and that was in effect as of the effective date of this section, shall, if otherwise valid, remain in effect until and unless it is repealed by the commissioner, who shall retain the authority to repeal any such rule, or is effectively repealed by an act of the legislature.