A Sign of Things to Come? Trump’s Regulatory Freeze and Other Early Actions

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Behind the pomp and circumstance of Friday’s inauguration, President Donald J. Trump and his administration set their sights on deploying a new guard of regulatory and economic policies focused on reducing burdensome regulations. The Trump administration wasted no time in sending a memorandum to all agency heads Friday night that called for an immediate regulatory freeze on all new and pending federal regulations. The regulatory freeze affects pending regulations in three ways: (1) agencies must refrain from sending any new regulations to the Office of Federal Register (OFR); (2) regulations previously sent to the OFR, but not published, must be withdrawn; and (3) regulations published by the OFR, but not put into effect, will be delayed 60 days. The memorandum carves out an exception to exempt regulations by the Office of Management and Budget for emergency situations or other urgent circumstances relating to health, safety, financial, or national security measures. Although currently frozen, the pending regulations are not doomed. They will be subject to review by the incoming secretaries and directors upon confirmation by the Senate and will require an Act of Congress to be formally rolled back.

The actions taken by the Trump administration are not unprecedented. The Obama administration issued a similar memorandum upon taking office in 2009. Accordingly, many agencies have taken measures to push through regulations in preparation of the likelihood of a freeze. Nonetheless, at least a few dozen Obama administration regulations were not completed from the Department of Transportation, Environmental Protection Agency (EPA), and the Department of Agriculture.

President Trump’s agenda and subsequent regulatory freeze can already be seen impacting various industries and agencies. Below is a brief summary of notable agencies affected by the regulatory freeze and a summary of two key orders affecting the healthcare and mortgage industries released on President Trump’s first day in office:

Notable Agencies Affected by the Freeze

Department of Transportation. Two significant Department of Transportation (DOT) regulatory initiatives impacting the oil and gas industry will be affected. A regulation governing the operation, safety, and maintenance of onshore hazardous liquid (including crude oil) pipelines will be halted and reviewed. DOT released a pre-publication copy of the regulations on January 13, 2016, but publication in the Federal Register did not occur prior to January 20. Similarly, a final regulation scheduled for publication in the Federal Register on January 23 – which would amend pipeline safety regulations, including accident and incident reporting requirements – will be subject to the freeze. The Trump administration will also re-visit a recent advanced notice of proposed rulemaking, released on January 10, 2017, seeking public comment on safety regulations governing the transportation of crude oil by rail.

Department of the Interior. At the Department of the Interior, the Fish and Wildlife Service’s decision to list as endangered the rusty patched bumblebee will be impacted by the freeze. The regulation was published in the Federal Register on January 11, but was not scheduled to become effective until February 10, 2017. The listing of the rusty patched bumblebee, if it ultimately goes forward, would likely have an impact on farming, in particular the use of insecticides, and development activities in large portions of the Eastern United States.

Environmental Protection Agency. The Environmental Protection Agency’s (EPA) ongoing efforts to promulgate regulations limiting greenhouse gas emissions from aircraft will be revisited by the Trump administration. In addition, a regulation published in the Federal Register on January 4 (but not effective until March 6) updating rules governing the application of restricted use pesticides will be reviewed. The EPA also proposed a rule on January 11, 2017, to ensure that hard-rock mining companies pay the costs to clean up their mines that will be under further review.

Department of Energy. Several Department of Energy (DOE) regulations have been released to the public on DOE’s website, but they have not yet been published in the Federal Register. Accordingly, the regulatory freeze will stop such publication pending further review. These regulations set energy conservation standards for portable air conditioners, commercial packaged boilers, walk-in coolers and freezers, and uninterruptible power supplies (including battery chargers). The Department of Energy has estimated the collective savings of these four regulations for businesses and consumers could be around $4.5 billion over the next 30 years. Nonetheless, many experts expect designated Energy Secretary Rick Perry to extensively scrutinize some of these regulations, in particular the commercial boilers regulation.

Department of Agriculture. At the Department of Agriculture (USDA), a set of proposed regulations designed to update the regulation of genetically engineered (GE) crops will be reviewed by the Trump administration. The proposed revisions – which would fundamentally alter how the USDA approves GE crops, and have been the subject of extensive controversy for many years – will be reviewed as part of the Trump regulatory freeze.

Department of Labor. A law supported by President Obama from the Department of Labor to expand eligibility for overtime pay to millions of low-salaried, full-time employees may be in flux. A federal court in Texas issued a preliminary injunction in response to two separate lawsuits opposing the law that were combined in October. The preliminary injunction put the law, which was set to go into effect on December 1, 2016, on hold pending a final ruling of the court. Because the law did not take effect before the freeze, it is now subject to the regulatory freeze. Additionally, the Department of Labor’s Occupational Safety and Health Administration issued a rule on January 6, 2017, dramatically lowering workplace exposure to beryllium from 2.0 micrograms per cubic meter to 0.2 micrograms per cubic meter in order to prevent lung disease, which will also come under review.

Department of Homeland Security. The Department of Homeland Security published a new rule on January 17, 2017, to make it easier for foreigners to be granted “parole status” in the U.S. for up to five years to build their startup. Under the international entrepreneur rule, foreign startup founders must own at least 15 percent of the startup, have started the company in the U.S. within the last three years, and raised at least $345,000 from investors or received at least $100,000 in grants. Similarly, the Department of Homeland Security’s United States Citizenship and Immigration Services published a proposed rule change for EB-5 immigrant visas on January 13, 2017, in the Federal Register that will be under review by the Trump administration. The EB-5 visa, which was created to stimulate the U.S. economy through job creation and capital investment, is extended to foreign investors for two years who invest at least $1 million in a project that creates a minimum of 10 jobs or $500,000 in an economically depressed region creating 10 jobs. The new proposal raises the required investment minimums to $1.8 million or $1.35 in economically depressed areas.

Executive Order Minimizing the Economic Burden of the Affordable Care Act

The Trump administration also signed into effect Friday night an executive order to “minimize the economic burden of the Patient Protection and Affordable Care Act pending repeal.” The order grants the federal government broad discretion to ease regulatory burdens on individuals, states, and the healthcare industry. While the order makes no substantive changes immediately, it sends a strong message that more action is on the way. President Trump has stated that he would prefer a nearly simultaneous repeal and replacement of the Affordable Care Act. Experts opine that the order is designed to give states greater flexibility in their requests for waivers that introduce market-oriented reforms. The U.S. Department of Health and Human Services (HHS) could also use the order as a basis for not enforcing penalties on employers who do not offer health insurance to their employees. The biggest implication from the order may be that it arguably allows HHS to grant widespread hardship exemptions from the individual mandate. Although HHS is not expected to take such action as long as insurers remain subject to the guaranteed issue provisions of the law, granting widespread hardship exemptions would likely cause mayhem in the individual insurance market.

Trump Administration Suspends Recent Reduction of Federal Housing Administration (FHA) Annual Mortgage Insurance Premiums

The Department of Housing and Urban Development (HUD) released a statement Friday that the reduction to the annual mortgage insurance premiums had been suspended indefinitely without further explanation. The premium reduction previously announced by President Obama’s administration would have lowered the annual premiums by 25 basis points to .60. Julian Castro, the outgoing HUD Secretary, had stated that the reductions were to offset rising mortgage rates for low-income and first-time homebuyers. While some experts believe the reduction would generate an additional $50 billion in single-family loan endorsements in 2017, others claim the effect would be minimal.

Why Bradley?

The first 100 days of the Trump administration and the accompanying regulatory reforms are sure to have an immediate impact on your business interests. To put that into perspective, President Obama withdrew 11 economically significant rulemakings (those carrying an economic impact of over $100 million or more), whereas President Bush withdrew 17. The vast and diverse team of lawyers at Bradley is well-equipped and prepared to keep you and your business not only apprised of the changes but ahead of the competition. We are leading a coordinated effort amongst all of our practice groups to ensure we can protect your interests on all fronts. Our team is committed to being a full-service asset to your business for a wide of issues, including healthcare, insurance, financial services, corporate and securities, energy, environmental, economic development, construction, labor and employment, and governmental affairs.