Notice & Comment

Musings on EO 13771’s Impact on ‘Off-Balance Sheet’ Regulations, by Erin Noakes

Agencies have long known that the formal promulgation of rules is a regimented process, involving codification of requirements and consideration of public comments. The natural curb on agency evasion of this onerous process is the potential threat of lawsuits under the APA, but EO 13771 generates another, possibly more stringent curb.


The Jan. 30, 2017 EO 13771, “Reducing Regulation and Controlling Regulatory Costs,” has a provision under Section 3(c) that states, “Unless otherwise required by law, no regulation shall be issued by an agency if it was not included on the most recent version or update of the published Unified Regulatory Agenda as required under Executive Order 12866, as amended, or any successor order, unless the issuance of such regulation was approved in advance in writing by the Director.” EO 13771 also contains a definition of regulation that closely tracks the APA definition of rule: “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.”


A few concrete examples can reveal the gulf between regulations that are included in the Unified Regulatory Agenda, and those that are published in the Federal Register. For example, in calendar year 2016, the Department of Commerce published 387 actions that were labeled as final rules (excluding the 172 proposed rules published that year). Yet its Fall 2015 Unified Agenda only listed 73 regulation identifier numbers (RINs) that were in the final rule stage. Its Spring 2016 Unified Agenda only added another 46 unique RINs as compared to the Fall 2015 Unified Agenda, and its Fall 2016 Unified Agenda only added another 1 unique RIN that was in the final rule stage. Arguably, the Department of Commerce published 387 Rules in 2016, while only listing 120 RINs that were in the final rule stage during the expanse of possibly applicable Unified Agendas.


For example, one of the rules that came into effect during 2016 but that was not listed in the Unified Agendas for the Commerce Department during the applicable time frame was a modification of the Export Administration Regulations. The regulations were being changed to conform to a description of certain dual-use items that could be used for nuclear proliferation activities, which was developed during a June meeting of global experts (81 FR 94971, Dec. 27, 2016). This final rule claimed a military and foreign affairs exemption from the APA notice and comment period, and stated that it was immediately effective. This type of rule would likely be exempt from the definition of ‘regulation’ under EO 13771, because it could fall under the exemption for regulations issued with respect to a military, national security, or foreign affairs function of the United States under Section 4(a). So, some portion of the published rules that were not ever mentioned in the Unified Agenda are likely to qualify for this exemption.


However, another example is the publication of a temporary rule for the transfer of commercial fishing quotas among states, published by the National Marine Fisheries Service (NMFS) under the Commerce Department (81 FR 89010, Dec. 9, 2016). Two states agreed to transfer certain quotas, which requires agency sign-off. The agency approved the transfer and published the new quotas, claiming that the rule was exempt from EO 12866. However, it’s not clear from the language of EO 13771 whether such exemptions from EO 12866 matter in how EO 13771 is applied. The requirements seem to attach to each new regulation – not necessarily to only the regulations covered by EO 12866. Would this temporary rule on fish quota transfers require OMB Director approval? Would it necessitate deletion of two other rules? And could an agency cite a few of last year’s flounder quota interim rules as the regulations to be repealed, even though they no longer impact anything?


As another example, the NMFS issued an interim final rule that prohibited humans from approaching whales off the coast of Hawai’i (81 FR 62010, Sept. 8, 2016), which was not published on the Unified Agenda. The interim final rule operated as a stop-gap measure for a regulation that had been in place since 1987 under the Endangered Species Act. What caused the change is that the NMFS had developed further sub-categories of whale classifications, and the term they used to describe the Hawai’i whales was not used by the original 1987 Endangered Species Act (ESA) regulation. Therefore, in order to ensure continuity of coverage, the NMFS issued a substantively similar (although not identical) regulation under the Marine Mammal Protection Act (MMPA). The NMFS claimed a waiver of the notice and comment provisions of the APA, on the (questionable) grounds that leaving the whales without protective regulations would undermine the objectives of the MMPA.


If the NMFS attempted to issue this interim final rule in a world where EO 13771 was in effect, would it have elected to forego the sub-classification process altogether, rather than generate the need to promulgate a new rule to maintain largely existing protections of whales? Would the NMFS have consolidated the MMPA regulation in with the re-classification rule? Would it have argued that one of the rules under the ESA had been effectively repealed, even though it was still on the books, because the terminology no longer applied? Or would some formal revocation be required?


The Director of the OMB will be issuing guidance on standards for determining what qualifies as new and offsetting regulations, but even so, as a practical matter, the fact that EO 13771 contains its own definition of ‘regulation’ no longer allows an agency to exercise discretion to label something as a rule or a notice. The definition for regulation in EO 13771 could apply to some portion of agency activity that agencies choose – sometimes for expediency – to not label formally as rules. Along with the 387 final rules published during 2016, the Department of Commerce also published 2,269 “Notices.” How many of these will be picked up by EO 13771’s definition of regulation, especially those that are an agency statement of its procedure?


One of these notices announced the availability of the NOAA Commercial Space Policy (81 FR 4615, Jan. 27, 2016) – a finalization of a process that established components for improved engagement with the commercial sector. Would such a notice be subject to the 1 in, 2 out provisions of Section 2(a) of EO 13771 because it constitutes an agency statement of its procedure requirements? If so, would NOAA be reluctant to issue this policy (which received comments from multiple commercial stakeholders)? Or would this type of document continue to fly under the radar as something other than a regulation for purposes of EO 13771?


Much is uncertain in how this will be implemented, but the Sec. 5(b) of EO 13771 did state that the order shall be implemented consistent with applicable law. Therefore, we can be assured that the law of unintended consequences is likely to have a significant impact on how this EO plays out.

* Erin Noakes is a special counsel for the U.S. Government. The views expressed herein are those of the author.


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