Notice & Comment

Questions Concerning Federal Regulations during the Obama-Trump Transition, by John Cooney

cooney_john_lrThe press and regulated entities have been asking many questions about the status of regulations issued under the Obama Administration, and whether and how they might be revised or repealed when the Trump Administration takes office.  These questions arise in four major areas — Executive Orders, Midnight Rules, application of the Congressional Review Act, and ongoing judicial reviews of major regulations.  A number of these issues, among others, are addressed in the ABA AdLaw Section’s Report to the President-Elect on Improving the Administrative Process, which you can read in full here. While the politics are well understood, published discussions show little awareness of the legal rules that would actual govern efforts by the incoming team to change these rules.

Executive Orders

Most Executive Orders are “politically enforceable” only, in the sense that they do not grant any legal rights to the public and are not enforceable in court.  Rather, most Orders are simply statements of the President’s policy priorities, expressed as a formal directive to the agency heads who have been delegated by Congress the authority that is necessary to implement the President’s wishes.  The fact that Executive Orders are published in the Federal Register often misleads people about their actual force and effect.

Executive Orders in this broad category can be repealed immediately by a new President, by the simple act of issuing a new Order invalidating it.  But the incoming President need not repeal an Order with which he disagrees.  He can simply tell his staff to instruct the agency heads to ignore his predecessor’s Order and not to take political enforcement action against an agency that does not comply with the now outdated policy.  This silent repeal of a prior Orders happens with some frequency, when a new President does not want to take the political heat for formally and visibly abandoning a policy of his predecessor.

There are some situations, encountered relatively infrequently, in which an Executive Order implements statutory authority delegated directly to the President.  Management of federal lands in the west is one example; another category, in which the Obama Administration has been active, is in establishing standards for federal contractors concerning the wages and working conditions of their employees.  The most important area of direct Presidential implementation of a statute by Executive Orders concerns economic sanctions under the International Emergency Economic Powers Act.  In issuing or revoking Orders issued by his predecessors that implement an express delegation of authority to him, the President must follow the specific procedures established by the underlying statute.

Since the vast majority of Executive Orders are discretionary policy statements to agency heads, the most important step in most instances is not the issuance of the Order itself, but the implementing actions taken by the agency under the powers delegated to them by Congress and that can be used to carry out the President’s policy preferences.

The President cannot, by Executive Order or other executive fiat, invalidate or modify the final actions taken by an agency head to implement his policy directives.  Those actions remain in full force and effect unless revoked or amended by the agency under its authorizing statute and the Administrative Procedure Act, or unless overturned by a court.

Midnight Rules

Before it leaves office, the Obama Administration will promulgate a series of economically significant regulations, commonly known as “Midnight Rules.”  Some of these rules could have been promulgated earlier but were withheld to avoid political opposition before the elections.

Shortly after noon on January 20, President Trump’s chief of staff will  issue a Memorandum to the heads of Executive agencies subject to Presidential control, directing them to (1) withdraw any rules signed by the Obama agency have been submitted to the Federal Register for publication but have not yet been published; and (2) not submit any additional rules to the Federal Register until they have been approved by the Trump White House staff.

The Obama Administration planned well in advance for this flurry of rulemaking action at the end of its tenure, based on the experience of the three prior Administrations.  On December 15, 2015, the head of the White House Regulatory Review process wrote to the agencies subject to White House control to inform them of the Administration’s plans for reviewing and issuing major rules in its last 70 days.  The agencies were instructed to give OMB early warning of their regulatory priorities, and OMB concentrated its review process on these rules, so that they would be ready for promulgating shortly after the election while still satisfying the Administration’s policy preferences and quality standards for the analyses on which the rule was based.

The significance of Midnight Rules revolves around January 20.  For an Obama Administration rule to become effective, it must be published in the Federal Register by January 19.  Under the Administrative Procedure Act, a regulation enters into effect only upon its physical publication in the Federal Register.

A rule that has been signed by the agency head but has not been published in the Federal Register is not a final agency action, and has no legal force and effect.  Regulations that had been signed by the outgoing Obama agency head can be withdrawn by the incoming Administration if the Trump agency head sends a letter to the Federal Register withdrawing the Obama submission prior to its publication.  The withdrawal of an unpublished is entirely discretionary with the new regulatory head.  The agency does not have to provide any justification, and the action is not subject to judicial review in court.

Once a rule has been published in the Federal Register, however, it is a final agency action and has the force and effect of law.  Once it has been published, a rule cannot been withdrawn and can be revoked or amended only if the agency undertakes a new notice and comment rulemaking process to develop a record and a rationale for that action.  The result of this second rulemaking would be subject to judicial review.

The Obama Administration understood that if not planned carefully, the rush of regulatory submissions to the Federal Register after the election could cause a log jam and prevent rules from being published and becoming effective before the new Administration takes office.  Based on the detailed planning and review process run by OMB, we can anticipate that a series of important regulations will be published during the lame duck period between now and January 19.

Congressional Review Act

The first significant action foreshadowing challenges to major regulations issued by the Obama Administration occurred on November 17 and concerned liberalizing the criteria for successful Congressional challenges to Obama rules under the Congressional Review Act.

Under the CRA, economically significant rules signed by Obama agency heads and published since approximately May 30, 2016 can declared invalid, and deprived of all force and effect, by adoption under expedited procedures (including no filibuster in the Senate) of a Joint Resolution of disapproval that is passed by Congress within 60 days after the 15th day business of the new Congress that will convene on January 3 and that is signed by the President.  Opponents of individual Midnight Rules and other important regulations adopted since May 30 are exploring whether a Republican Congress could be persuaded to adopt resolutions of disapproval under the CRA that would be forward those laws to President Trump for almost certain signature.

The CRA is designed to provide a Congressional check on Midnight Rules issued by the outgoing Administration during a transition between Administrations of the two parties.  The CRA has been successfully invoked only once before, at the end of the Clinton Administration to disapprove an OSHA rule regulating keyboards to prevent repetitive stress injuries.

The major constraint on use of the CRA during the first weeks of the Trump Administration will be the scarcity of floor time.  A resolution of disapproval of an individual Obama Administration rule would have to compete with all other policy priorities before Congress in the first 100 days of the new Administration, such as passing an appropriations bill to the fund the government, confirmation of senior Trump appointees, infrastructure funding, revising the Tax Code, and modifying the Affordable Care Act.

The Obama Administration has been counting on the fact that Congressional leadership likely would have many other, higher priorities than invalidation of agency rules during the immediate aftermath of the Trump Administration’s taking power.  The calculation was that even if one or two Midnight Rules were invalidated under the CRA, many other important agency rules would become law and go into effect, which would not be a bad batting average.

On November 17, the House adopted a bill that would amend the CRA to permit a block vote to disapprove more than one rule at a time.  If adopted, this law presumably could be invoked to invalidate all Midnight Rules in one vote or, indeed, all significant rules adopted by the outgoing Administration since May 30.  Such a significant regulatory disapproval resolution presumably could command the floor time necessary for completion of the CRA process.  The November 17 bill will not be adopted in this Congress.  Its passage by the House is an important development in the regulatory sphere, however, because it is a warning to all participants in the political process concerning the approach the House is likely to take after President Trump is sworn in.

Judicial Review in Federal Courts

Many major Obama Administration regulatory initiatives are currently under review in federal courts, such as the legality of EPA’s regulation of greenhouse gas emissions from existing coal-fired power plants and the constitutionality of the structure of the Consumer Financial Protection Bureau.

Once in office, the Trump Administration theoretically could decide to drop the legal defense of controversial rules issued by the Obama Administration and support the challengers instead.  Such a “confession of error,” based on the outcome of the Presidential election and an ensuing change in Executive Branch policy, has rarely happened in prior transitions for political reasons.

By changing sides, the Trump Administration would have to take full political responsibility for the abandonment of an Obama rule.  For political reasons, this generally is considered an unattractive option by an incoming Administration, as it would thereby take permanent ownership of any adverse developments that occur in that field for the rest of its tenure.  In this transition, however, the Trump Administration may see political benefits from switching sides and taking a position in court that is adverse to an Obama Administration regulation it ran against.

The positions taken by the Obama Administration in defending a recently enacted regulation typically will be supported by private sector intervenors, and perhaps some States, that would have full authority to continue defending the agency action in court.  The litigation over the legality of a rule thus would continue, even if the Trump Administration were to change sides.  The intervenors would argue that the interpretation of its authorizing statute adopted by the agency under Obama is correct, and that the change in position advocated by the Trump Administration was politically motivated and incorrect, and should be rejected.  If the court were to uphold the Obama Administration regulation, the Trump Administration would have received considerable political criticism heat for little gain.

Regardless of the outcome of the litigation, the Trump Administration would always have the fallback option of seeking to implement its policy preferences by having its appointee to head the agency conduct a comprehensive new rulemaking to change the regulation.

John Cooney served as Deputy General Counsel of the Office of Management and Budget during the Reagan Administration, where for five years he ran the Executive Order process for the White House and where his principal client was the Office of Information and Regulatory Affairs, which conducted the process for Presidential review of agency rules.  He is now a partner in Venable LLP in Washington, D.C.

This is post is part of the Symposium on the ABA AdLaw Section’s 2016 Report to the President-Elect. An introduction to the symposium is here, and all of the posts are collected here. The views in this post, which expand upon the recommendations set forth in the Report, are the author’s own and do not necessarily reflect the views of the ABA AdLaw Section. The full Report is available here.

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