December 6, 2016

Reining in Obama Regulatory Overreach

  • Republicans have the opportunity to enact the most significant regulatory reform since President Reagan.
  • Regulatory reform will look at executive and legislative actions, including freezing new regulations, rescinding executive orders, and enforcement discretion.
  • A part of that reform will be Congress passing legislation under the Congressional Review Act to overturn last-minute regulations imposed by the Obama administration. 

In the new session of Congress, the House and Senate will have until early May to use the Congressional Review Act on regulations issued in the last half year of the Obama administration. This effort by Congress can be part of an overall effort that looks to reform the regulatory process. 

“When Mr. Trump takes office with a Republican-controlled Congress … more than 150 rules adopted since late May are … vulnerable to the ax.”New York Times, 11-16-2016

Some major Obama-era regulations will not be eligible for the CRA based on the date those regulations became final – these include the Coal Ash Rule (10/19/15); Ozone Rule (10/1/15); and the Waters of the US Rule (8/28/15). Rules such as these will need to be addressed administratively or through legislation. 

The most likely Day 1 action will be for the president’s chief of staff to issue a memo to all agency heads to freeze regulations that are in the pipeline. This will give the new administration time to review and apply its policy priorities to any new rules being issued. President Obama’s chief of staff Rahm Emanuel issued a memorandum to this effect at the start of the Obama administration. The administration also will have wide latitude to rescind executive orders, such as the pause on new coal leasing, and exercise enforcement discretion, as with the Clean Power Plan.


Overtime Rule: On May 18, the Department of Labor published its final overtime rule. The rule more than doubles – from $23,660 to $47,476 – the annual salary threshold under which workers generally qualify for time-and-a-half pay when working more than 40 hours in a week. The department also took the unprecedented step of automatically increasing the salary threshold every three years. On November 22, the U.S. District Court for the Eastern District of Texas granted a temporary nationwide injunction blocking implementation the rule while the court decides if the department had the authority to write the final rule in the first place.

 Blacklisting Rules: On August 23, the Department of Labor issued guidance – and the Federal Acquisition Regulatory Council issued final rules – implementing President Obama’s 2014 Fair Pay and Safe Workplaces executive order. The rules require that federal contractors report violations of 14 different labor laws, plus similar state laws, to the federal government. These include violations that are still being contested in court. The companies reporting violations could be blacklisted from receiving federal contracts. On October 23, the U.S. District Court for the Eastern District of Texas temporarily blocked parts of the rule requiring companies applying for government contracts to disclose new data about labor law violations. The judge left intact the rule’s paycheck transparency provision, which requires employers to print on paychecks information like whether the person is an independent contractor or an employee under the Fair Labor Standards Act.


IRS Recharacterizing Debt As Equity (Sec. 385): On October 13, the Treasury Department finalized rules that would recharacterize some debt as equity. This would have the effect of raising taxes, since businesses often loan money to each other and can deduct interest payments on these loans. The Treasury Department is trying to protect against a practice known as “earnings stripping,” in which a U.S. corporation takes loans solely for the purpose of reducing its tax bill with interest deductions. The IRS needs to ensure that legitimate business transactions are not affected by these regulations.


Teacher Preparation: On October 12, the Education Department released its final rule for teacher preparation programs. The rule requires federal standards for evaluating these programs, based significantly on student test scores. This conflicts with the flexibility Congress provided in the recent reauthorization of the Elementary and Secondary Education Act. It also runs afoul of prohibitions in the law on federally mandated teacher evaluations.

State and Local Education Accountability: On November 29, the Department of Education issued its final regulations modifying the accountability measures for K-12 schools. Under last year’s Every Student Succeeds Act, states must have an accountability system, which they choose for themselves. The intent was to provide maximum flexibility to states. The department’s final rules are too prescriptive, conflict with congressional intent, and violate explicit prohibitions on the secretary’s authority to regulate.


Regulation Supporting Planned Parenthood: In September, the Department of Health and Human Services issued a notice of proposed rulemaking that could prevent states from blocking Title X funding to Planned Parenthood. Title X provides federal tax dollars for family planning services. While this rule is only at the “proposed” stage, it is expected that the Obama administration will try to finalize it before January 20. 


Energy Valuation Rule: The Interior Department’s Office of Natural Resources Revenue issued a final rule on June 30 regarding the valuation of coal produced on federal and Indian land, as well as oil and natural gas produced on federal land and waters. The rule changed the way royalties are calculated when companies sell the fossil fuels they extract from federal land.    

Energy Efficiency Rules: The Energy Department has finalized six of 14 energy efficiency rules it had pledged to release this year as part of its broader climate policy, including new efficiency standards for ceiling fans, dehumidifiers, and battery chargers. These rules increase the price of energy-powered products and reduce manufacturing jobs.   


Public Land Planning 2.0 Rule: On December 1, the Interior Department’s Bureau of Land Management issued a final rule establishing the procedures used to prepare, revise, or amend land use plans under the Federal Land Policy and Management Act. The final Planning 2.0 Rule empowers bureaucrats in Washington to direct massive landscape-scale plans. It takes authority away from local land managers who have the most experience overseeing resources in their own districts and could substantially limit energy development, mining, grazing, and recreation on federal land.  

Methane Emissions Rules for Oil and Gas Sources: On November 16, the Bureau of Land Management issued a final rule regarding methane emissions from venting and flaring during oil and natural gas production on federal and Indian land. Separately, on June 3 the Environmental Protection Agency published a final rule regarding methane emissions from new and modified oil and gas production, natural gas processing, and transmission sources. These rules will hurt American oil and gas jobs. They also are unnecessary because America’s oil and gas producers are already voluntarily reducing their methane emissions.

Endangerment Finding for Aircraft Emissions: On July 25, the Environmental Protection Agency issued a final rule making a finding under the Clean Air Act that greenhouse gas emissions from aircraft endanger public health and welfare. EPA’s endangerment finding paves the way for the agency to propose aircraft engine greenhouse gas emissions standards in the future.