Sneak Preview: OMB Memo Provides Agency Guidance on Deregulation

(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Office of Management and Budget (OMB) recently issued guidance to federal agencies to encourage them to take more proactive steps to rapidly remove existing rules that they deem “facially unlawful,” including regulations that may impact federal financial assistance programs.

Earlier this year, the Trump administration issued executive orders aiming to reduce the amount of federal regulations governmentwide (see “Considering the Impact of the 10-for-1 Executive Order”). On April 9, the president issued a memo entitled “Directing the Repeal of Unlawful Regulations,” which instructed agencies to identify certain categories of unlawful and potentially unlawful regulations within 60 days and begin plans to repeal them.

The review called for agencies to evaluate existing regulations’ lawfulness in light of the following U.S Supreme Court decisions:

• Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024): Eliminating the requirement that courts must defer to agency interpretations of the federal laws they administer.
• West Virginia v. EPA, 597 U.S. 697 (2022): Holding that the Environmental Protection Agency (EPA) lacked the authority under the Clean Air Act to impose emissions reductions by shifting electricity production from higher-emitting to lower-emitting sources.
• SEC v. Jarkesy, 603 U.S. 109 (2024): Holding that when the Securities and Exchange Commission seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.
• Michigan v. EPA, 576 U.S. 743 (2015): Holding that EPA must consider economic costs when deciding how to regulate power plants under the Clean Air Act.
• Sackett v. EPA, 598 U.S. 651 (2023): Holding that the Clean Water Act only extends to wetlands and permanent bodies of water with a “continuous surface connection” to “traditional interstate navigable waters.”
• Ohio v. EPA, 603 U.S. 279 (2024): Staying EPA’s federal emissions reduction rule because the applicants were likely to succeed in arguing that it was arbitrary or capricious under the Clean Air Act.
• Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021): Holding that a California regulation granting labor organizations a “right to take access” to an agricultural employer’s property to solicit support for unionization constitutes a per se physical taking.
• Students for Fair Admissions v. Harvard, 600 U.S. 181 (2023): Holding that Harvard’s race-conscious admissions process violated the Equal Protection Clause of the 14th Amendment. This case has been the subject of recent agency policy involving grant programs and diversity, equity and inclusion initiatives (see “DOJ Memo Defines Federal Stance on Unlawful Discrimination”);
• Carson v. Makin, 596 U.S. 767 (2022). Holding that Maine’s “nonsectarian” requirement for tuition assistance payments to parents who live in school districts that do not operate a secondary school of their own violates the free exercise clause of the First Amendment.
• Roman Catholic Diocese of Brooklyn v. Cuomo, 592 U.S. 14 (2020): Holding that a preliminary injunction was warranted given the likelihood of success on the merits in a case alleging COVID-19 restrictions violated a “minimum requirement of neutrality” by specifically naming religious entities for restrictions while allowing secular businesses categorized as “essential.”

“In effectuating repeals of facially unlawful regulations, agency heads shall finalize rules without notice and comment, where doing so is consistent with the ‘good cause’ exception in the Administrative Procedure Act (APA),” the April 4 memorandum stated. “That exception allows agencies to dispense with notice-and-comment rulemaking when that process would be ‘impracticable, unnecessary or contrary to the public interest.’ Retaining and enforcing facially unlawful regulations is clearly contrary to the public interest. Furthermore, notice-and-comment proceedings are ‘unnecessary’ where repeal is required as a matter of law to ensure consistency with a ruling of the U.S. Supreme Court. Agencies thus have ample cause and the legal authority to immediately repeal unlawful regulations.”

(The full version of this story has now been made available to all for a limited time here.)
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