Hogan Lovells Publications | Health Alert | 22 November 2016

Rolling back the clock – What the new administration and Congress can do to halt or delay the Obama administration's midnight regulations

In the waning months of the Obama Presidency, the exiting administration could finalize new regulations. These so-called “midnight regulations” could affect major sectors of the United States economy—from healthcare to energy. But the ultimate fate of such regulations would rest with the new Trump Administration and the new Congress, which together have a variety of tools at their disposal to delay, alter, or undo any Obama Administration final regulatory push.

Two tools are available to the Trump Administration to delay, alter, or undo any Obama Administration midnight regulations:

(1) rulemaking authority under the Administrative Procedure Act (APA), and

(2) an assertion of executive authority to temporarily delay the effective date of final but not-yet-effective midnight regulations.

 Another is available to the new Congress:

(3) blocking midnight regulations using the expedited procedures in the Congressional Review Act (CRA).

These tools are applicable to regulations, which represent binding policy and are generally subject to APA procedural requirements, including giving notice to and opportunity for comment by interested stakeholders. As such, final regulations are among the more difficult of executive regulatory actions for a new administration to alter or undo. In contrast, agency guidance represents non-binding policy and is generally not subject to such procedural requirements. Agency guidance is much easier for an incoming administration to rescind or alter, as, in general, no notice or opportunity for comment is necessary.

APA Rulemaking. The ordinary rulemaking procedures of the APA are the most traditional and familiar avenue available to the new Trump Administration to delay, alter, or withdraw any Obama Administration midnight regulations. The new administration could amend or withdraw final regulations through a notice-and-comment rulemaking process. The Trump Administration could also decline to finalize or withdraw any proposed rules that have not yet been finalized by Inauguration Day.

Executive Memorandum. Second, and less well-known, is the practice of incoming Presidents of issuing an executive memorandum ordering a 60-day blanket delay on all midnight regulations that have not yet taken effect. The practice of ordering this temporary delay was established by President Reagan and has since been followed by Presidents of both parties. Since 1981, all Presidents following a different-party transition of power have issued some form of a 60-day delay memorandum affecting all final but not-yet-effective regulations. Generally, these blanket orders have included exceptions, such as for emergencies or other good cause. Notably, such memoranda have not purported to rescind or alter not-yet-effective midnight regulations.  They have simply afforded incoming administrations additional time to review all such regulations and, as desired, institute rulemaking procedures to further delay, alter, or rescind them.

If President Trump were to follow suit, his delay memorandum could affect most, if not all, major regulations (i.e., those with an economic impact of $100 million or more) that are finalized after November 21, 2016, given that major regulations are generally subject to a 60-delay in their effective date.

There is little published case law exploring the scope of the President’s authority to order such temporary delays, but the practice is a longstanding one. In the past, the President’s legal advisors in the Office of Legal Counsel at the Department of Justice have defended the practice, citing both Constitutionally-grounded executive discretion and the APA’s exceptions to the requirements of notice and comment rulemaking.

Congressional Review Act. Finally, the new, Republican-led Congress could rely on the CRA’s disapproval provisions to entirely block midnight regulations promulgated by the Obama Administration. Although it has been seldom invoked with success in the past, the CRA provides Congress with a means to disapprove regulations on an expedited basis.

Although strict timing rules limit access to the expedited disapproval procedures of the CRA, the statute provides for a special “carry-over period” where final regulations reported to Congress during one session carry-over into the next—preserving for a new Congress access to the expedited disapproval procedures. According to an estimate by the Congressional Research Service, any final regulation issued after late May of 2016 is potentially subject to disapproval by the incoming Congress under the CRA’s expedited procedures.

As the clock winds down on his time in office, the next few months represent President Obama’s last opportunity, as President, to shape the nation’s regulatory agenda. But, in many cases, the fate of his administration’s midnight regulations will be left in the hands of President Trump’s administration and the new Congress. Whether through the APA, an executive memorandum, or CRA disapproval procedures—the newly elected political branches of government have tools at their disposable to potentially delay or unmake any final regulations issued at the end of the Obama Administration.

* Laura McDonald also contributed to this report.