          Amendment of the Farmers Home Administration
                    Disaster Loan Program

U n d er applicable provisions o f th e A dm inistrative P ro ced u re Act, am endm ents to regula­
  tions gov ern in g the disaster lo a n program adm inistered b y the Farm ers H om e A dm inis­
  tratio n (F m H A ) can be m ade effective im m ediately, w ithout giving the public a prior
  o p p o rtu n ity to com m ent, if th e F m H A finds for “g o o d cause” th at notice and public
  p ro c ed u re thereon would be “ im practicable, unnecessary, or con trary to the public
  in terest.”

It is fo r th e rulem aking agency to determ ine w h e th er th ere is “good cause” for dispensing
   w ith notice and comm ent; h o w e v er, if the facts are such that the authorized adm inistra­
   tiv e purpose w ould be frustrated by delay, th e argum ent for proceeding expeditiously is
   reasonable on its face.

                                                                               April 24, 1981

  - M EM ORANDUM O P IN IO N FO R T H E CO UN SEL TO T H E
    D IR E C T O R , O FFIC E O F M A N A G EM EN T A N D BU D G ET

   You have requested the views of this Office on a procedural question
that involves regulations that govern the disaster loan program adminis­
tered by the Farmers Hom e Administration (FmHA). The question is
w hether the Fm H A can amend these regulations and make the amend­
ment effective immediately, without giving the public an opportunity to
comm ent on the amendment beforehand.
   T he relevant facts, as we understand them, are as follows: The
disaster loan program is governed by Title III of the Consolidated
Farm and Rural Development Act, as amended (the Act), 7 U.S.C.
§§ 1961-1996. The Act authorizes the Secretary of Agriculture to make
and insure loans for persons whose agricultural operations have been
“substantially affected” by natural disaster. 7 U.S.C. § 1961(b). It also
gives the Secretary broad authority to make regulations that prescribe
the terms and conditions under which those loans will be made and
insured. See 7 U.S.C. § 1989. Relying upon that general authority, the
Fm H A has promulgated elaborate regulations that establish eligibility
standards, loan criteria, and loan application procedures. See 45 Fed.
Reg. 9848 (1980). The Fm H A is now considering various amendments
to these regulations, and the question has arisen whether these amend­
ments can be made effective for loan applications arising from disasters
that occurred in the 1980 crop year. With the advent of the new
planting season, the 1980 applications are being filed and granted at a

                                               104
rapid rate, and the process will be complete in a few weeks. The
amendments now under consideration cannot substantially affect that
process unless they are made effective immediately.
  The Act itself does not require the agency to follow any particular
procedure in making or amending the regulations that govern the loan
program. The relevant provisions of this Administrative Procedure Act
(APA), which establish a generic “notice and comment” procedure for
informal agency rulemaking, do not apply of their own force to matters
relating to agency “loans.” 5 U.S.C. § 553(a)(2). The Secretary of
Agriculture, however, has adopted the APA procedure and has made it
applicable to all USDA loans. In a memorandum published in July,
1971, the Secretary announced the following policy:
         The public participation requirements prescribed by 5
         U.S.C. § 553(b) and (c) will be followed by all agencies of
         the Departm ent in rule making relating to . . . loans . . . .
         The exemptions permitted from such requirements where
         an agency finds for good cause that compliance would be
         impracticable, unnecessary, or contrary to the public in­
         terest will be used sparingly, that is, only when there is a
         substantial basis therefor. Where such a finding is made,
         the finding and a statement of the reasons therefore [sic]
         will be published with the rule.
36 Fed. Reg. 13,804 (1971).1
   To our knowledge, this memorandum has never been modified or
withdrawn. It has been treated by the courts as an agency rule, binding
on the Fm HA while in force. See Berends v. Butz, 357 F. Supp. 143 (D.
Minn. 1973).
   The 1971 memorandum makes reference to the statutory exemption
that permits new agency rules to be effective without prior comment
by the public. Under the APA, this exemption may be invoked if the
agency finds, for “good cause,” that notice o f a proposed rule and
public procedure thereon would be “impracticable, unnecessary, or
contrary to the public interest.” 5 U.S.C. §§ 553(b)(B), 553(d)(1). In
accordance with the terms of the 1971 memorandum, the Fm HA may
invoke the statutory exemption if it makes the required “good cause”
finding and the finding is supported by a “substantial basis.”
   It is for the agency to determine whether the circumstances of the
present case are such that the exemption to the notice and comment
procedure should be invoked. The judgment whether notice and com­
ment is “impracticable, unnecessary, or contrary to the public interest”
is judicially reviewable, see, e.g., Nader v. Sawhill, 514 F.2d 1064
(Temp. Emer. Ct. App. 1975); but at bottom it is a policy judgment,

   1We note that the 1971 memorandum adopts the “ public participation” requirements o f § 553(b) and
§ 553(c) but does not by its terms adopt the 30-day publication requirement of § 553(d)

                                                105
grounded in facts and in the agency’s view o f what the interests of the
public require. W e note simply that if the amendments under consider­
ation here are authorized by the Act, and if the facts are such that the
authorized administrative purpose would be frustrated if the effective
date o f the amendments were delayed, the argument for proceeding
expeditiously, on grounds o f practicality and public interest, is reason­
able on its face.2

                                                      T   heodore     B.   O   lson

                                                   Assistant Attorney General
                                                    Office o f Legal Counsel




   2 W e would also observe that the Secretary of Agriculture is free at any time to revoke or render
inapplicable to any particular rulemaking the policy established in 1971. Such revocation, in toto or as
applied to a specific rulemaking, w ould, we believe, be dispositive of the question raised by the
existence o f that policy. Such revocation should be done tn a public document at any point prior to
issuance o f a final rule. See Nader v. Bork, 366 F. Supp. 104 (D .D .C. 1973).

                                                106
