The White House is drafting legislation that would give federal regulatory agencies broad powers to suspend the laws under which they operate so that they could conduct regulatory experiments.

The proposal is part of a major "Regulatory Reform Act" that the administration plans to submit to Congress early next month. The package will include a wide range of measures to reduce the burden of regulation on industry and promote the use of economic incentives to achieve regulatory goals.

The bill would affect 16 federal agencies, including the Agriculture Department, Health, Education and Welfare Department, Environmental Protection Agency, Federal Trade Commission, Interstate Commerce Commission and Nuclear Regulatory Commission.

If passed by Congress, the legislation would affect billions of dollars in regulations in virtually every sector of the American economy from the oil and nuclear industries to the trucking and shipping industries to agribusiness and securities.

"This is a response to the backlash against regulatory activity," said Peter Petkas, director of the Regulatory Council, an administration group set up last month to oversee regulations. "As a result of the environmental, health and safety and economic legislation of the 1960s, there has been a mushrooming of regulatory activity by the agencies. The sheer volume of regulations has given critics a weapon.

"The administration's answer," Petkas said, "is not to gut the Clean Air Act or the Occupational Health and Safety Act. We're saying let's manage the job better so we don't have regulatory excess."

Officials from the Domestic Council, Justice Department, Office of Management and Budget, EPA and FTC have been working on the "reform" package for three months. Drafts were submitted to the affected agencies on Jan. 12.

One part of the proposal, according to a Jan. 31 draft, is to allow agency heads to initiate regulatory experiments or "demonstration projects" not authorized by Congress. Among the 12 examples given:

Establishing marketable rights to engage in regulated activities -- for example, businesses could buy the right to a certain amount of air pollution.

Making tradeoffs between two or more public health or safety regulations in which the risks are similar. For example, a business would be allowed to emit more of one pollutant if it cuts back on another.

Allowing businesses to change prices without agency approval -- for example, in the trucking, shipping or energy industries.

Substituting performance standards for technology-based standards -- for example, telling power plants what air quality they must achieve, without forcing them to install stack scribbers to do it.

A draft of the regulatory experiment proposal leaked to the Environmental Defense Fund elicited a letter of protest to the White House domestic policy chief, Stuart Eizenstat. "Such a provision is almost certainly unconstitutional and would be struck down by the federal courts," wrote EDF attorney Robert J. Rauch. "We are strongly opposed to giving administrative agencies the authority to undertake these experiments without specific congressional authorization."

In response, Joan Z. Bernstein, general counsel of the Environmental Protection Agency, acknowledged that the provision "may well be unconstitutional and if there are serious questions about its constitutionality, we won't push it. It is very preliminary."

Bernstein, who, along with Si Lazarus of the White House staff, heads the drafting effort, said, "It certainly is bold. This whole thing is terribly controversial, but that's not to say we shouldn't think about trying some controversial things."

While the experiment proposal may be dropped from the final package, Lazarus said other "major reforms" will very likely be included. For example:

Requiring agencies to publish "regulatory analyses" that outline the economic impact of regulations and discuss alternatives, and then to choose the most cost-effective approach.

Eliminating, in some cases, requirements for full administrative procedures in which atorneys cross-examine witnesses, thus reducing the time and hassle involved in making new regulations. Such an approach was proposed last year by the chairman of the Senate Governmental Affairs Committee, Abraham Ribicoff (D-Conn.). It could profoundly affect agencies such as the Nuclear Regulatory Commission.

Requiring agency heads personally to supervise the early stages of regulation development so that economic issues can be brought to the fore. For example, they would have to sign off on a published regulatory agenda every six months.

The draft bill also includes a provision to fund citizens groups that want to intervene in regulatory proceedings. This proposal, supported by the administration last year, could sweeten the package for environmental groups that are likely to oppose it.

Despite the opposition, Pekas predicted that, "Unless we go to Congress with concrete proposals, there will be efforts to take the teeth out of environmental and health and safety legislation. The perception in Congress is that regulations are burdensome, and we better do something about that quickly."