Guidance Helps Explain One-In, Two-Out Regulatory Order

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By Cheryl Bolen

The Office of Information and Regulatory Affairs quickly issued interim guidance for agencies grappling with President Donald Trump’s new executive order requiring two regulations to be eliminated for every one issued.

All regulatory activity was frozen on Jan. 20 by a memorandum issued by White House Chief of Staff Reince Priebus. Once the freeze is lifted, the new order’s requirements will apply to all significant regulatory actions by agencies between noon on Jan. 20 and Sept. 30, the end of the fiscal year.

In general, executive departments and agencies may comply with the order’s requirements by issuing two “deregulatory” actions for each new significant regulatory action that imposes costs, said the guidance document signed by Dominic Mancini, acting administrator of OIRA.

OIRA requested public comment on the guidance, which should be sent to reducingregulation@omb.eop.gov by Feb. 10. It is likely the guidance, which was presented in a question-and-answer format, will be updated following the comment period.

It is also possible that the guidance could change once the new director of the Office of Management and Budget is confirmed. Trump’s nominee to head the OMB, Rep. Mick Mulvaney (R-S.C.), is currently awaiting Senate confirmation.

Fleshing Out Details

Susan Dudley, director of the Regulatory Studies Center at the George Washington University, who served as OIRA administrator from April 2007 through the end of the George W. Bush administration, said the guidance appeared thorough.

One of the big questions left open from the executive order was the definition of “regulation,” which seemed to be quite sweeping, Dudley told Bloomberg BNA. OIRA’s guidance narrowed the scope of the order to “significant” regulations, which was a smart move, she said.

Another big question in the order was how to measure costs, Dudley said. OIRA’s guidance determined that it would be the standard that it has always used, which is “opportunity costs,” she said.

“Which is a hard thing to do,” Dudley said. “It would have been much easier if they had said it was administrative costs, like they do in Canada.”

Determining Opportunity Costs

To understand how to measure opportunity costs, it is helpful to compare what OIRA is requesting with what is being done in Canada and the U.K., Dudley said.

Canada counts “administrative burdens” in measuring costs, which includes only direct costs such as the number of hours filling out forms, but not indirect costs such as the time spent installing or maintaining equipment, Dudley said.

The U.K. counts compliance costs to business, which would include costs such as time spent operating equipment, Dudley said. “In practice, the compliance costs, the way the U.K. does it, is a good proxy for most types of regulations for opportunity costs,” she said.

Still, there are other types of regulations, such as proving whether a product is safe, where the compliance cost is small but the opportunity cost could be huge, Dudley said. This is where the OIRA guidance diverges from the U.K., she said.

‘Steep Learning Curve.’

“That’s hard [to determine], but that is what agencies are supposed to do when they write a new regulation,” Dudley said. “And so OIRA is saying we want you to use the same metric when you decide which regulations you want to remove.”

The order effectively directs agencies to reallocate their internal resources away from developing new regulations and toward evaluating existing ones, she said.

This is going to be a “steep learning curve” for agencies, similar to when agencies were first required to conduct regulatory impact analyses before issuing a regulation, Dudley said.

Over time, agencies have gotten more and more sophisticated at those analyses, Dudley said. But they have not had much incentive to look back at regulations issued years ago to see what impact they are having now in terms of costs and benefits, she said.

“It’s something that I think they should do,” Dudley said. “I think everybody agrees that, from a good government perspective, we should always be looking back as well as forward, just to see what worked.”

Some Exemptions

The order and the guidance apply to all regulations, even those required by statute.

“All regulations are required by statute at some point,” Dudley said, adding that the executive branch under the Constitution can’t write laws without authority delegated by Congress.

Still, some statutes are broad and agencies have a lot of flexibility in how they regulate, Dudley said. Other statutes can be quite specific and include prescriptive dates, which may be more difficult for agencies to handle, she said.

The guidance appears to exempt regulations under a statutory or judicial deadline from immediately identifying two regulations for elimination.

According to the guidance, agencies may proceed with significant regulatory actions that need to be finalized in order to comply with an imminent statutory or judicial deadline even if they are not able to identify offsetting regulatory actions by the time of issuance.

Also exempted are regulations that affect only other federal agencies; that are issued with respect to a military, national security, or foreign affairs function; or that are related to agency organization, management, or personnel.

To contact the reporter on this story: Cheryl Bolen in Washington at cbolen@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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