January 31, 2017
On January 30, 2017, President Trump signed an executive order entitled “Reducing Regulation and Controlling Regulatory Costs.”[1] As the title suggests, the order is intended to reduce the burden imposed by federal regulations and establish a cap on the costs that such regulations impose on the United States economy. It could prove to be one of the most significant developments for agency rulemaking in decades.
The order imposes two important new requirements on rulemakings at Executive Branch agencies. First, the order requires agencies that propose new regulations to identify “at least two existing regulations to be repealed.” Order § 2. “[A]ny new incremental costs associated with” a new regulation must “be offset by the elimination of existing costs associated with” the two regulations identified as candidates for repeal. Id. § 2(c). In other words, agencies must attempt to offset the cost of new regulations by eliminating old ones. The order provides that the Director of the Office of Management and Budget (“OMB”) will provide guidance to help agencies comply with this requirement, and to identify “emergencies and other circumstances that might justify individual waivers of” the requirement that the costs of new regulations be offset by the repeal of existing regulations. Id. § 2(d).
Second, the order establishes an annual budgeting process that seeks to control the cumulative costs imposed by each agency’s regulations. For fiscal year 2017, which is underway, the order requires the total incremental cost of new regulations to be zero—i.e., in 2017 agencies may not increase the burden currently imposed by their regulations unless an exception applies. Order § 2(b). Beginning in fiscal year 2018, OMB will “identify to agencies the total amount of incremental costs that will be allowed for each agency in issuing new regulations and repealing regulations for the next fiscal year.” Id. § 3. The total amount identified by OMB “may allow an increase or require a reduction in total regulatory cost.” Id. § 3(d). In other words, each agency will have a regulatory “budget” determined by the Director of OMB, and that budget may require agencies to reduce the costs imposed by their regulations. As with the requirement that agencies offset the cost of new regulations by identifying existing regulations for repeal, the order provides that the Director of OMB will provide further guidance on how agencies should implement this requirement. Id. § 3(e).
According to multiple press reports, shortly after releasing the order the White House stated that it does not apply to independent agencies, such as the Securities and Exchange Commission, that are not subject to the OMB regulatory review process. (Any agencies not covered by the order would have the option of voluntarily adhering to its “cost neutral” regulatory approach.) The order categorically exempts “regulations issued with respect to a military, national security, or foreign affairs function of the United States”; “regulations related to agency organization, management, or personnel”; and “any other category of regulations exempted by the Director” of OMB. Order § 4. The order also provides that it “shall be implemented consistent with applicable law,” id. § 5(a)(i), and indicates that it is not intended to create any enforceable private rights of action, id. § 5(c).
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The new executive order represents a substantial change in rulemaking at executive departments and agencies. Unlike previous executive orders that require agencies simply to consider the costs and benefits of proposed regulations, the order seeks to impose a hard cap on the cumulative regulatory burden imposed by each agency. In doing so, it will provide a significant incentive for agencies to examine current regulations to identify those that may be rescinded or modified to reduce regulatory burdens. Regulated entities and other interested parties who favor the adoption of new rules in certain areas will likewise be motivated to simultaneously identify old regulations that may be repealed, in order to make room for the new regulatory requirements that they propose. Going forward, OMB’s implementation of the order will be an important issue to monitor, given the details that remain to be fleshed out and the substantial discretion afforded the Director to carry out the order.
[1] See Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs (“Order”), WhiteHouse.gov, https://www.whitehouse.gov/the-press-office/2017/01/30/presidential-executive-order-reducing-regulation-and-controlling (Jan. 30, 2017).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’sAdministrative Law and Regulatory practice group, or the authors:
Eugene Scalia – Co-Chair, Washington, D.C. (+1 202-955-8206, [email protected])
Helgi C. Walker – Co-Chair, Washington, D.C. (+1 202-887-3599, [email protected])
Michael D. Bopp – Washington, D.C. (+1 202-955-8256, [email protected])
Thomas H. Dupree, Jr. – Washington, D.C. (+1 202-955-8547, [email protected])
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