A Q&A with Federal Regulation Scholar Susan Dudley on Reconsidering Regulations

dudleysusan-2015_crop_webSusan E. Dudley is Director of the George Washington University Regulatory Studies Center, which she founded in 2009, and a distinguished professor of practice in the Trachtenberg School of Public Policy and Public Administration. From 2007 to 2009, she served as the Administrator of the Office of Information and Regulatory Affairs (OIRA) in the U.S. Office of Management and Budget.

WLF Legal Pulse: As promised, Congress and the Administration have quickly gotten to work reconsidering and removing a host of federal regulations while also setting the stage for a much different approach to regulation.  Let’s first talk about what Congress is doing.

Professor Dudley: Under the Congressional Review Act of 1996 (CRA), Congress has 60 legislative days after a regulation is published to vote to disapprove it.  The procedures for disapproval are streamlined (including requiring a simple majority in the Senate) and if a rule is disapproved, the agency cannot issue something substantially similar.

The timing of a rule’s publication is important. Adjusting for weekends, holidays, time spent in home districts etc., experts who have looked at the legislative calendar for the remainder of the 114th Congress estimate that the 60-day window began in mid-June. This means that any rules issued since then are subject to disapproval by the 115th Congress, and will land on President Trump’s desk. His signature of a duly adopted resolution would overturn the rule.

As of last today, two resolutions of disapproval had passed both houses and were on their way to the president. One would overturn the Department of Interior’s stream protection rule and the other would overturn the Security and Exchange Commission’s rule requiring companies to report payments made to governments for the commercial development of oil, natural gas or minerals. Congress is considering several other disapproval resolutions and some experts predict as many as a dozen rules could be overturned with this procedure.

WLF Legal Pulse: Turning to the Executive Branch, the President recently issued Executive Order (EO) 13771 that in part requires federal agencies to eliminate two rules for every new rule they wish to promulgate.  In an analysis you did for Forbes.com, you listed a number of questions the order left unanswered.  Did the February 2 memo from the Acting Administrator of OIRA address any of those questions?

Professor Dudley: Yes, in rather short order, OIRA drafted (and sought comment on) interim guidance to operationalize the order.  The guidance clarified that “rule,” for purposes of identifying both new rules and offsets, will be limited to “significant regulations” as defined in EO 12866 § 3(f).

In addition to requiring the elimination of two rules for every new rule, EO 13771 imposes an incremental cost cap of zero in FY 2017.  The guidance directs agencies to estimate the social opportunity cost here, and to base estimated costs of existing rules should on what costs would be avoided if the rule were removed. The guidance also makes clear that EO 13771 does not replace the longstanding requirement that agencies analyze the benefits and costs of their regulations; it just adds an additional constraint.  

WLF Legal Pulse: For rules that don’t fall under the CRA, what process must regulatory agencies follow to rescind them?

Professor Dudley: An agency would have to go through all the procedures required to issue a new regulation. These steps are governed by the Administrative Procedure Act of 1946 and include developing a legal record justifying the proposed change (including technical and economic analysis), and seeking public comment on that record and the proposed regulatory (deregulatory) action. The agency would have to respond to public comment, which may lead to modifications to the draft regulation, before it issues a final rule. These steps generally take at least a year, but the story won’t likely end there.

When the final rule is issued, two records will exist, one developed to support the original regulation and a second that supports its elimination or modification. The revised rule will almost certainly be litigated, with parties that supported the original rule pointing to the earlier record to defend their objections. This legal process may take years to resolve.

This is, by the way, the same process that agencies will have to follow to comply with the “one in, two out” executive order.

WLF Legal Pulse: A number of court challenges against Obama Administration regulations are still ongoing.  Can the new administration seal the fate of those rules in how they address the suits?

Professor Dudley: How the Justice Department defends against such lawsuits will definitely affect their ultimate outcomes. This may be especially relevant since President Obama’s agencies pushed the limits of executive power with controversial rules related to the environment, health care, financial markets, the workplace, and more. In response to legal challenges, several court decisions appear sympathetic to the argument that they went beyond the powers assigned to the executive branch by the Constitution and delegated to it by Congress.

For instance, soon after the November election, a federal judge in Texas issued an injunction temporarily blocking implementation of the Department of Labor’s expansive overtime regulation which would have shifted salaried employees making less than $47,500 to hourly positions that receive mandatory overtime pay. The judge found merit in the argument brought by 21 state attorneys-general and small business groups that the Department of Labor had overstepped its statutory authority.  Last October, the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay on EPA and the Army Corps of Engineers’ “Waters of the United States”(WOTUS) rule.

WLF Legal Pulse: In both of those examples of legal challenges, states played a major role.  Is there an ongoing role for states in reducing the impact of federal regulation?

Professor Dudley: I think there is.  In addition to the WOTUS action, consider that a year ago this month, the Supreme Court took the unusual step of staying EPA’s Clean Power Plan while cases brought by more than two dozen states and utilities continue to make their way through the lower courts.

One of the grounds for challenging all these rules is their far reaching exercise of control over matters that under the Constitution have been considered the purview of the states. As a result, the states may play an important role in how these are resolved in the current administration, especially given its and congressional leaders’ desire to shift responsibility for environmental regulation from the federal bureaucracy to the states.

President Obama’s Clean Power Plan already exempted Alaska and Hawaii from its coverage.  Perhaps the new administration will signal to other states that it would entertain their requests for the same exemption.

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