Trump Administration Orders Regulatory Freeze and the Elimination of Two Pre-existing Regulations for Every New Regulation Issued
On January 20, 2017, President Trump’s Chief of Staff, Reince Priebus, issued a memorandum implementing an immediate regulatory freeze of any new or pending regulations until they have been reviewed and approved by Trump Administration appointees. Days later, on January 30, President Trump signed an executive order that requires agencies to repeal at least two pre-existing regulations for every new regulation issued. These actions signal the start of the Trump Administration’s efforts to scale back and eliminate some of President Obama’s key regulatory initiatives, and to reduce the compliance costs stemming from regulations going forward.
The January 20th Memorandum
It is not uncommon for a new administration to temporarily suspend regulatory activity pending review by the new President’s designees—President Obama’s and George W. Bush’s Chiefs of Staff issued similar directives in 2009 and 2001, respectively. Nonetheless, the January 20th Memorandum, one of the President’s first executive actions, is likely the start of many moves intended to chip away at President Obama’s regulatory legacy.
Specifically, the January 20th Memorandum instructs agencies to immediately stop submitting any regulations for publication in the Federal Register until a Trump agency head reviews and approves the proposed action. Similarly, agencies are required to withdraw any regulations that have already been sent to, but not published by, the Federal Register, so that a Trump designee can first review and approve the proposal.
The memorandum also instructs agencies to further review questions of fact, law, and policy raised by any regulations that have already been published in the Federal Register, but not yet become effective. The effective date of such regulations will be temporarily postponed for 60 days to allow the agencies to conduct this review. At the end of the 60-day freeze, agencies are requested to notify the Office of Management and Budget Director of any regulations "that raise substantial questions of law or policy" and "take further appropriate action in consultation with the OMB Director." Agencies are asked to consider further notice-and-comment rulemaking to review the substance of the proposed action or to delay the effective date of the regulations beyond the 60-day period.
The memorandum applies to "regulatory action" and "guidance document[s]," meaning "any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking," and also covers any agency statement of general applicability and future effect "that sets forth a policy on a statutory, regulatory, or technical issue or an interpretation of a statutory or regulatory issue." However, regulatory actions that are subject to statutory or court deadlines are excluded from these requirements, as are regulations that are necessary to address emergency or urgent circumstances relating to health, safety, financial, or national security matters. The memorandum instructs agency heads to initially identify and notify the OMB Director of any regulations that the agency head believes should be excluded from the freeze due to statutory or judicial deadlines or because "the regulations affect critical health, safety, financial, or national security matters, or for some other reason." Thereafter, the OMB Director will make the final determination as to whether "such exclusion is appropriate under the circumstances."
The Executive Order
The January 30th Executive Order is intended to help "manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations." To that end, the Executive Order requires agencies and executive departments to "identify at least two existing regulations to be repealed" whenever they publicly propose or promulgate a new regulation. The Order applies to "regulations" or "rules," which are defined as agency statements of "general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy, or to describe the procedure or practice requirements of an agency." Rules that are related to the military or national security, or agency management or organization, are excluded from the Executive Order, as are "any other category of regulations" exempted by the Director of OMB.
In particular, the Executive Order requires the total incremental costs of any new regulation to be offset by the elimination of the costs associated with the repealed regulations. Beginning with fiscal year 2018, agencies will be required to identify each new regulation that increases incremental costs along with the offsetting rules that it expects to eliminate in that fiscal year. The agency must also provide an approximation of the total costs or savings associated with the new and repealed regulations.
The Executive Order contemplates future guidance from the Director of OMB before certain provisions become effective. For example, agencies are prohibited from issuing any regulations that exceed the individual agency’s "total incremental cost allowance" for the relevant fiscal year, which will be set by the OMB Director. And the Executive Order requires additional guidance from the OMB Director on a number of standards, including: standards for determining the costs of new and existing regulations; what qualifies as new and offsetting actions; and the process for accounting for costs in different fiscal years.
While only time will tell the full impact of Trump’s recent regulatory actions, agencies have already taken swift action, particularly in response to the January 20th Memorandum. Some agencies have already postponed the effective date of certain regulations that had been published in the Federal Register, but had not yet taken effect. The Environmental Protection Agency, for example, recently delayed the effective date of 30 regulations until March 21, 2017, including a final rule establishing biomass-based diesel standards for 2017 that was scheduled to take effect on February 10, 2017. The EPA noted that it may consider delaying the effective dates of these regulations even further.
Likewise, a number of proposed regulatory actions have been withdrawn from further consideration by the Office of Information and Regulatory Affairs, an office within the OMB that is responsible for reviewing certain agency actions prior to publication in the Federal Register. The move effects a number of proposals that were under OIRA review, including EPA’s final rule establishing standards of performance for grain elevators, and USDA's proposal to establish a national GMO ingredient disclosure standard and its long-pending organic aquaculture standard. These proposals will be returned to the agencies for further consideration by new agency officials.
The January 20th Memorandum and recent Executive Order are just the start of the new Administration’s efforts to eliminate what it views as over-burdensome regulations. Given that most of President Trump’s cabinet nominees have not yet been confirmed, it is too soon to tell how long the temporary freeze on new rulemaking activities will last or determine the ultimate fate of the final rules that are currently in limbo under the January 20th Memorandum. Likewise, because agencies cannot repeal existing regulations without going through the notice and comment rulemaking process, it is not clear how easy it will be for an agency to implement the Executive Order’s two-for-one elimination requirement. Moreover, we will not know which future regulatory actions could be subject to the Executive Order until agencies take further action or the OMB releases additional guidance.
In the meantime, however, at least until the President’s appointees are confirmed, interim or acting agency heads will be responsible for carrying out the recent executive actions, including identifying regulations that are subject to the regulatory freeze or notifying the OMB Director of those that should be excluded from it. It is wise for any stakeholder with an interest in pending or future regulations that are possibly covered by these recent actions to keep a close eye on regulatory activity over the coming weeks and months, both at the relevant regulatory agencies and OMB.
We will continue to monitor these events as they unfold. If you have any questions, please feel free to contact the authors of this alert or other Arent Fox professional who regularly handles your matters.