Executive order signed to dramatically cut federal regulations (Updated 1/31/17)

by Cydney Posner

The WSJ reports that the yet another executive order was signed today, this one designed to cut back on federal regulation. Under the executive order, federal agencies will need to eliminate two regulations for every new one created.  The intent of the order, according to the new President, is to cut at least 75% of all federal regulations. In addition,  according to the WSJ, the order “caps costs of new regulations for the remainder of the fiscal year and creates a budget process for new regulations in the next fiscal year, which begins in October. This budget, separate from the congressional appropriation process, will be set by the White House.” As subsequently reported by Reuters and as noted in thecorporatecounsel.net blog, the White House clarified and confirmed, after the signing of the executive order yesterday — and notwithstanding the President’s commentary immediately preceding the signing critical of Dodd-Frank and related rules — that the  executive order does not apply to the SEC or other independent regulators. (See this PubCo post.)

More specifically, the order provides that, “[u]nless prohibited by law, whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.” The terms “regulation” or “rule” mean “an agency statement 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.”

SideBar: That definition of regulation is fairly broad —  could it be interpreted to include agency “guidance” in addition to standard regulations?

Further, the order states that “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” In addition, for this current fiscal year, “the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero,” unless the OMB director says otherwise. Beginning in fiscal 2018, “the head of each agency shall identify, for each regulation that increases incremental cost, the offsetting regulations… and provide the agency’s best approximation of the total costs or savings associated with each new regulation or repealed regulation.” During the budget process, the OMB director — who seems to have a major role in this process — will advise each agency of the total incremental costs for new regs that the agency is allowed.  Each new regulation that has been approved by the OMB director can then be included in the Unified Regulatory Agenda and issued.  Regs related to the military, foreign affairs or national security are exempt.

Other than that, the order states that the OMB director will provide guidance on implementation: “Such guidance shall address, among other things, processes for standardizing the measurement and estimation of regulatory costs; standards for determining what qualifies as new and offsetting regulations; standards for determining the costs of existing regulations that are considered for elimination; processes for accounting for costs in different fiscal years; methods to oversee the issuance of rules with costs offset by savings at different times or different agencies; and emergencies and other circumstances that might justify individual waivers of the requirements of this section.” Sounds like there will need to be a lot of new rules instructing agencies how to eliminate rules.

SideBar:  How all this will play out is anyone’s guess. But some commentators suggest that the process may not be as simple or expeditious as anticipated. According to a former head of OMB’s Office of Information and Regulatory Affairs quoted in the Washington Post, the order “‘is going to be a lot of analytical work. It is not a trivial undertaking at all.’ He said existing regulations, many of them quite old, may have costs much different from the original estimates. Updating those estimates would be ‘a huge undertaking,’ he said.” The order also makes clear that the Administrative Procedure Act will apply to elimination of costs related to existing regulations, which means that, among other things, there will be notice and comment periods.  And how will the current rules and, if signed into law, proposed legislation (see this PubCo post) regarding cost-benefit analyses and congressional approvals factor in?  And, as in the existing regulatory regime, the process may also be complicated and drawn out as a result of legal challenges that can be expected to materialize.

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