On January 30, President Trump signed a “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs,” which is intended to zero-out regulatory costs by eliminating two regulations for every one implemented. The order requires that the costs associated with a new regulation must be offset by the elimination of existing costs associated with at least two prior regulations. The order goes into effect immediately and requires the cost of all regulations in fiscal year 2017, which ends September 30, to equal zero.

The order requires the Director of the Office of Management and Budget (“OMB”) to issue guidance to agencies on implementing the order. The guidance will include standards for measuring and estimating the costs of new and existing regulations and for determining what qualifies as new and offsetting regulations. The biggest question looming is what is the definition of a regulation? It is unclear whether regulation means a set of requirements published as one regulation in the Federal Register, or if each regulatory requirement contained in a set counts separately. For example, the U.K., which has a similar policy, counts regulatory requirements, not the whole set, which allows regulators to simplify a regulation and eliminate some of its burdens and still keep the rule. Once OMB issues guidance and decides what will count as a regulation, it will be easier to assess how big of an impact this Executive Order will have.

One of the biggest challenges for agencies trying to fulfill this order will be identifying regulations to eliminate. About half of federal regulations are mandated by statute and all others still require legal justification. Thus, any regulation eliminated is vulnerable to a legal challenge. To eliminate a rule, agencies must initiate a rulemaking under the Administrative Procedure Act, which requires a notice of proposed rulemaking, legal justification, a regulatory impact analysis and a public notice and comment period. This is a time-consuming process which could also be subject to judicial review.

It is important to note that several categories of regulations are exempted from the order, including regulations issued with respect to a military, national security, foreign affairs, agency organization, management or personnel function or “any other category of regulations exempted by the Director.”