Report Details EPA’s Aggressive Implementation of Deregulatory Agenda

Among the actions President Donald Trump has taken to reform the issuance of federal regulations, none exceed Executive Order (EO) 13771, Reducing Regulation and Controlling Regulatory Costs (January 30, 2017) in originality. That action stipulated that for every new regulation, the issuing federal agency must identify at least two prior regulations for repeal, replacement, or modification. The EO also stipulated that for fiscal year (FY) 2017, the total incremental cost of all new regulations and repealed regulations must not exceed zero.

The two-page EO lacked specifics about how agencies should comply with its requirements. More details were provided several months later by the Office of Management and Budget (OMB) in a document called Guidance Implementing Executive Order 13771 (April 5, 2017). The OMB directed agencies to identify their deregulatory and regulatory plans in their Semiannual Regulatory Agendas, along with the expected costs savings. The monetary aspects of those plans require OMB approval.

Now, in its first report on how the EPA is implementing EO 13771, the Agency’s Office of Inspector General (OIG) made several key findings. First, in FY 2017, the EPA had the highest number of deregulatory actions of any federal agency. Second, in FYs 2017 and 2018, the EPA exceeded both the numbers of deregulatory actions it anticipated making as well as the regulatory savings goals mandated by EO 13771 and the OMB. Third, the Agency fell short of being transparent about the regulatory actions it has taken, providing feedback to its program offices, and clarifying expectations for stakeholder outreach.

The OIG made four recommendations to the Agency to correct those perceived deficiencies. The EPA agreed to undertake two of the recommendations but disagreed with the other two. As of August 9, 2019, the date of the OIG’s report, all recommendations were unresolved.

Judicial Complaint Unsuccessful

The OIG states that it limited its audit to the management controls in place regarding EO 13771 and did not evaluate human health and environmental consequences of implementing the order. Concerns about those impacts were raised in a suit environmental and workers’ rights groups filed against the president because of the alleged impact the EO has on the environment and human health. The suit, which was denied in a U.S. District Court, included complaints against the OMB and individual federal agencies, including the EPA and other departments, because implementation of the EO violates federal law and results in harm to the environment and human health and fails to ensure the safety of the American workforce.

The court found that the plaintiffs were unable to establish standing to sue. Establishment of standing required the plaintiffs to demonstrate that they have particular members who will be harmed by the EO. But the court concluded that the plaintiffs failed to show that any delay of the regulatory action attributable to the EO will substantially increasethe risk that any of their members will be harmed or will face a substantial probabilityof harm once such an increase in risk is taken into account.

EO and OMB’s Guidance

Beginning in FY 2018, the EO directs the heads of each federal agency to identify—for each regulation that increases incremental cost—at least two offsetting prior regulations and provide best approximations of the total cost of each new regulation and the cost savings associated with the repealed regulations. No new regulation may be issued unless it is first identified in the agency’s Semiannual Regulatory Agenda or unless issuance of such a regulation is approved by the OMB. During the presidential budget process, the OMB informs the agencies of the total amount of incremental costs that will be allowed in issuing new regulations and repealing regulations for the next FY. No regulations exceeding the agency’s cost allowance will be permitted in that FY unless required by law or approved by the OMB.

Exceptions to the above requirements are permitted for regulations affecting military, national security, or foreign affairs functions; for regulations related to agency management or personnel; and for any other category of regulations exempted by the OMB.

Less than 1 month after issuing EO 13771, the president issued EO 13777, Enforcing the Regulatory Reform Agenda. This EO required that each federal agency establish a regulatory reform task force comprising agency senior officials. These task forces oversee each agency’s regulatory agenda, including identifying regulations that eliminate jobs, or inhibit job creation; are outdated, unnecessary, or ineffective; or impose costs that exceed benefits.

The OMB’s guidance includes the following points:

• The EO applies to significant regulatory actions as that term is defined in EO 12866. Primarily, a significant regulatory action is one that is likely to have an annual effect on the economy of $100 million or more or adversely affects the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; or raises novel legal or policy issues.

• A deregulatory action has a looser definition and includes but is not limited to informal, formal, and negotiated rulemaking; guidance and interpretative documents; actions related to international regulatory cooperation; and information collection requests that repeal or streamline recordkeeping, reporting, or disclosure requirements.

• A statutorily or judicially required regulation is one that is explicitly required by law or mandated by the courts.

• Significant interim and direct final rules must also be offset.

• The OMB will consider on a case-by-case basis if regulatory actions issued before January 20, 2017, that are vacated by a judicial order and for which all appeals have been resolved qualify as deregulatory actions.

• EO 13771 does not change the agency’s obligations regarding regulations they must issue by law without consideration of cost. However, agencies will generally still be required to offset the costs of such regulatory actions through other deregulatory actions pursuant to statutes that do not prohibit cost consideration.

Costs and Savings

The OIG notes that the EPA did not develop internal guidance or management controls to implement EO 13771. Other than several memorandums from the administrator, including one issued March 24, 2017, which established a Regulatory Reform Task Force, the EPA relied solely on OMB guidance to implement the EO. The OIG’s findings include the following:

• In FY 2017, the EPA has an annualized cost savings of $21.5 million that was achieved via 16 deregulatory actions and 1 regulatory action. The single regulatory action was issuance of Effluent Guidelines and Standards for the Dental Point Source Category at a cost of $54 million. The major deregulatory actions included postponement of certain compliance dates for effluent limitations guidelines and standards for the steam electric power generating point source category, which saved $65 million, and relaxation of the Reid Vapor Pressure gasoline standard in parts of Tennessee, which saved $7 million.

• The EPA’s FY 2018 incremental cost allowance was $40 million annualized cost savings. In FY 2018, the EPA completed 10 deregulatory and 3 regulatory actions, with an annualized cost savings of $75.1 million. The major regulatory action was promulgation of renewable fuel volume standards for biomass-based diesel for 2019, which carries a cost of $10 million. The two top deregulatory actions were issuance of user fees for the electronic hazardous waste manifest system and amendments to manifest regulations, which saved $57 million, and amendments to the national minimum criteria for disposal of coal combustion residues from electric utilities, which is anticipated to save $26 million.

• According to the OIG, at the EPA, the ratio of deregulatory-to-regulatory actions has routinely been greater than the required two-for-one ratio. However, the Agency’s overperformance is not unique, and other federal agencies, including the Departments of Agriculture, Commerce, Health and Human Services, and Transportation, also exceeded their minimum requirements.

Implementation Deficiencies

The OIG said the EPA’s implementation of both EOs and the OMB’s guidance had the following limitations:

• The EPA’s public webpage detailing its deregulatory accomplishments does not contain information on regulatory actions in progress or completed under EO 13771. Instead, it provides a link to the OMB’s Office of Information and Regulatory Affairs’ website. The OIG found differences in the information provided by both sites, which could confuse stakeholders trying to monitor and track the impacts of the EPA’s EO 13771 actions.

• Information on the disposition and status of EO 13771 recommendations and actions was not known by some EPA program staff the OIG interviewed. “For example, some program office staff involved in the nomination of actions to the Office of Policy did not routinely receive feedback on their recommendations,” said the OIG.

• The Administrator’s March 24, 2017, memorandum instructed program offices to solicit feedback from external stakeholders and provide this feedback to the Regulatory Reform Task Force. But the OIG found that program offices were not explicitly instructed to continue this activity in subsequent years. Moreover, a second memo the acting administrator issued August 17, 2018, only states that the Task Force meet regularly to consider specific recommendations for regulatory reform. There is no established schedule that determines how frequently the Task Force should meet to consider feedback and recommendations regarding regulatory and deregulatory actions.

Recommendations

Generally, the OIG concluded that the EPA “could do more to increase transparency of the regulatory actions it is taking, provide feedback to its program offices, and clarify expectations for stakeholder outreach.” Following are the OIG’s specific recommendations and the EPA’s responses.

• Amend guidance for the Regulatory Reform Task Force to specify:
  • Frequency of meetings. The EPA agreed and said its Regulatory Reform Task Force will meet twice per year as part of the agency’s Semiannual Regulatory Agenda process.
  • The public dissemination of progress reports and regulatory and deregulatory recommendations. The EPA agreed to post its initial progress report on its regulatory reform website. However, the Agency said it had no plans to produce additional Regulatory Reform Task Force progress reports or share regulatory and deregulatory recommendations by any means other than the Semiannual Regulatory Agenda.
  • The frequency and means of stakeholder outreach. The EPA disagreed, stating that in 2017, it opened a regulatory reform docket and held over 10 separate stakeholder outreach events. Since then, staff and senior leadership from all the major EPA media offices and the Office of the Administrator have continued to meet with and receive input from external stakeholders. “The agency has a long history of robust stakeholder engagement through individually requested meetings, recurring meetings, comments on regulatory actions, conference attendance, etc.,” said the EPA. “Stakeholders often provide suggestions for regulatory reform in these contexts. Additional guidance regarding stakeholder outreach would be duplicative to these ongoing practices.”
• Establish or identify an accessible portal that can provide up-to-date information on deregulatory and regulatory actions taken under EO 13771. The EPA disagreed, stating that its Semiannual Regulatory Agenda serves as an accessible portal that provides the public with information on regulatory and deregulatory actions. The OIG responded that the agenda is updated only twice a year, and the Agency should provide the public with more frequent updates on its implementation of EO 13771.