• A Sea of Change: The Congressional Review Act and Energy Regulation
  • May 24, 2017 | Authors: David A. Baay; Robert A. Lemus
  • Law Firm: Eversheds Sutherland (US) LLP - Houston Office
  • The beginning of 2017 has brought a sea change within the US regulatory regime, with yet unknown global effects. While Congress and the administration targeted many regulations, only 15 were reviewed and only 14 were repealed. Repealing other regulations will likely take more time and effort from Congress, and may not be as effective. This evidences a commitment to campaign promises to roll back regulations and reduce government oversight. However, for at least three of the regulations that impact companies and the way they conduct business, the repeals are largely symbolic.

    Since President Donald Trump and his administration have taken office, the White House and Republicans in control of the House and the Senate have used the Congressional Review Act (CRA), 5 USC §§ 801-808, to block 14 out of the 15 “midnight” regulations promulgated by the Obama Administration.1 The CRA has received a lot of attention in the first few months of Trump’s presidency because of its widespread use in the White House initiative to roll back regulations. Before 2017, the CRA had been used only once.2

    Enacted in 1996, the CRA allows Congress to review administrative regulations within 60 legislative days of their promulgation, with extensions for a newly seated Congress, and to give the rules a simple majority up or down vote by joint resolution without filibuster. If Congress passes a joint resolution disapproving the regulation, the regulation is invalidated and cannot take effect upon the signature of the joint resolution by the President. When the regulation is nullified by the CRA, the regulation cannot be “reissued in the same form,” or in a variation that is “substantially the same,” as the nullified regulation. The 115th US Congress had until May 11, 2017, to use the CRA to issue joint resolutions on regulations promulgated on or after June 13, 2016.

    In 2017, Congress disapproved the following 14 administrative regulations:

    1. Fair Pay and Safe Workplaces EO
    2. Stream Protection Rule
    3. Gun Limits for the Severely Mentally Ill
    4. Oil Anti-Corruption Rule
    5. Unemployment Compensation Drug Test Rules
    6. Women’s Health Care Protections
    7. BLM’s Land Use Planning Rule
    8. ESSA Accountability and State Plan Rules
    9. ESSA Teacher Preparation Standards
    10. State Retirement Savings Plans Rules (I)
    11. State Retirement Savings Plans Rules (II)
    12. Alaska National Wildlife Refuges Rule
    13. OSHA Recordkeeping Rule
    14. Broadband Privacy Protections

    For clients operating in the US energy sector, certain repealed regulations are noteworthy—the Interior Department’s Stream Protection Rule (81 FR 93066), the Securities and Exchange Commission’s Oil Anti-Corruption Rule (81 FR 49359), and the Occupational Safety and Health Administration’s Recordkeeping Rule (29 CFR 1904). The repeals of these regulations are noteworthy for at least three reasons. First, and most obvious, corporate compliance with these regulations is no longer necessary, and these regulations will not be reissued in the same or substantially the same form. Second, the administration and the current US Congress are committed to their campaign promises to cut down on regulations and government, though the accepted expedited mechanism under the CRA is now foreclosed. Third, while corporate compliance with the regulations is no longer necessary, it is important to note that driving industry forces and obligations under foreign regulations that target the same issues remain untouched.

    The Stream Protection Rule required coal mining companies to avoid surface coal mining practices that adversely affected water supplies, surface water and groundwater quality, streams, fish, wildlife, and related environmental values. See 81 FR 93066. Members of Congress articulated that this regulation would kill coal mining jobs, harming the coal industry and the American economy. The White House signed the joint resolution on February 16, 2017, which prevents the Interior Department from reissuing the regulation, or a variation that is substantially the same, in the future. It is unclear if or when the Interior Department may try to address the subject matter of the regulation in the future. That said, industry, market, and consumer forces continually drive industries, like mining, to find better, safer, and more efficient technologies.

    The Securities and Exchange Commission (SEC) promulgated the Oil Anti-Corruption Rule under the authority of § 1504 of the Dodd-Frank Act, also known as the Cardin-Lugar Amendment anti-corruption provision. At a high level, this regulation required any oil, gas, or mining company that files an annual report with the SEC to include a disclosure of the type and total amount of both country and project-level payments to host governments. Members of Congress articulated that the authority for the regulation may be suspect, that the regulation would put companies that are publicly traded in the United States at a disadvantage, and that the regulation enforces social issues, which is inconsistent with the core mission of the SEC. The White House signed the joint resolution on February 14, 2017, stating that this will bring back energy jobs to America. Notably, the 28 countries of the European Union, Canada, and Norway have established largely equivalent transparency rules requiring companies to disclose this same information to other regulators around the globe. Congress appears to want the SEC to issue a new regulation that is not as anti-competitive, though what form that regulation will take is unknown. In the interim, the nullification of this regulation will have little impact on multinational energy companies that make disclosures under other regulatory regimes, though they need not make these disclosures to the SEC.

    The Occupational Safety and Health Administration’s (OSHA’s) Recordkeeping Rule addressed a 2012 court ruling that vitiated years of precedent regarding OSHA’s ability to enforce recordkeeping violations that are more than six months old.3 The regulation sought to clarify OSHA’s recordkeeping directive and extend the accurate recordkeeping of serious workplace injuries and illnesses obligation of employers from six months to five years. Members of Congress articulated that this regulation would reduce jobs and harm the American economy. The White House signed the joint resolution on April 3, 2017. At this time, OSHA can issue citations for only those recordkeeping violations that have occurred in the preceding six months. However, most companies with robust process safety policies that track key performance indicators and try to employ leading indicators will likely continue to maintain records for as long as they deem necessary internally. Additionally, destroying records related to an incident that then turns into litigation can subject a company to a spoliation instruction for that evidence, unless the company can show a business purpose for its conduct, such as a short document retention policy.

    While the unprecedented use of the CRA to nullify the “midnight” regulations of the previous administration may be at an end, some conservatives urge a novel continued use of the CRA. They advocate using the CRA to nullify regulations going back to 1996, arguing that these regulations did not comply with the requirements of the CRA for Congressional review, and thus Congress may yet review these regulations once the regulators properly promulgate them. We will see whether such an action will be effective; however, it is clear that the current administration and Congress have an appetite for removing regulations and the ones that have fallen under the CRA are likely just the beginning of what could be a drastic sea change in the US regulatory regime. However, globalization and the rise of regulatory regimes around the world will likely blunt the impact of the regulatory changes in the United States as companies seek to comply with the greatest common global denominators of regulations for efficiency’s sake.

    In determining how to navigate the shifting waters of the regulatory regimes around the world, it is important to be mindful of all applicable regulations and the regulatory priorities of pertinent administrative bodies. Companies should be mindful of the greatest common global denominators of regulations to ensure that they comply with, or exceed, the requirements of the various regulatory regimes that they might encounter. Companies may need to find innovative solutions to this new global uncertainty.

    1 Only the Bureau of Land Management rule targeting methane emissions survived the use of the CRA, with a vote of 49-51 in the US Senate.

    2 In 2001, under George W. Bush, Congress rolled back an OSHA rule on ergonomics promulgated in the twilight of the Clinton Administration via the CRA.

    3 AKM LLC dba Volks Constructors v. Sec'y of Labor, 675 F.3d 752, 753 (D.C. Cir. 2012)