How Will a 2-for-1 Regulatory Scheme Really Work?

Posted on 2/14/2017 by Roger Marks

According to the President’s Executive Order titled “Reducing Regulation and Controlling Regulatory Costs,” agencies will now be required to nominate two regulations for repeal for every new regulation promulgated. 

While the initial Executive Order raised many questions, it deferred authority to the Office of Management and Budget (OMB) to lay out the specifics of how the new regulatory initiative would work. Now, the OMB issued a guidance document that answers some of those questions about how exactly a regulatory 2-out, 1-in process will work.    

What Regulations Will Be Affected?

Code of Federal RegulationsFirst and foremost, according to OMB’s guidance, the EO’s requirements will apply to significant regulatory actions, as defined in Section 3(f) of Executive Order 12866 (signed in 1993). EO 12866 defines a significant regulator action as an action that may: 
Have an annual effect on the economy of $100 million or more;
Create a serious inconsistency or otherwise interfere with an action taken by another agency;
Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or 
Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in the Executive Order. 

How to Calculate Regulatory Costs and Savings 

When calculating the costs of new rules or the cost savings for rules proposed for elimination, regulators will measure cost as “opportunity cost to society.” This concept is defined in OMB Circular A-4, issued in September 2003.
The cost savings may be transferred within an Agency—meaning US EPA may eliminate two hazardous waste requirements to offset the cost of a new Clean Air Act rule, for example. If an individual agency cannot generate the savings needed to offset a new rulemaking, it can request in writing that savings from another agency be transferred to meet the requirement for offset.  

The OMB guidance document, offered in a helpful Q&A format, goes on to answer many other questions about how exactly the 2-out, 1-in scheme will play out. 
While the idea of eliminating regulations has raised concerns from some in the EHS community, it is worth noting that the United Kingdom, Australia, and Canada have all enacted similar offset requirements for new regulations in the past.
OMB has made it clear that the execution of this Executive Order will draw from existing principles for controlling regulatory costs found in documents like the above-mentioned 1993 EO and 2003 OMB Circular. In addition, limiting the EO to significant rulemakings, meaning those with an impact of $100 million or more, will limit the scope and should allow agencies some flexibility to advance less impactful rulemakings without a need for offset.  

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How do you feel about the idea of a 2-out, 1-in regulatory process? Do you have ideas for regulations that would provide great cost savings without affecting safety at your site?
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