Amidst the flurry of Executive Orders (“EOs”) that tends to accompany any new administration, one EO may have flown under the radar. But for the regulated community—which, these days, includes most businesses in some form or another—this EO could be both a source of opportunity and of angst.[1]

The EO, titled “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative” (the “Deregulation EO”), was issued on February 19.[2] Consistent with the president’s long-stated goal to streamline and minimize federal agency regulation, the Deregulation EO sets forth a series of directives to federal agencies aimed at reducing regulations and minimizing the administrative state. This client alert summarizes the Deregulation EO and opines on the opportunities for the regulated community to seek reform or deregulation, on the one hand, or to prioritize existing or new regulations, on the other.

1.  The Deregulation EO

The Deregulation EO directs all agency heads to review their existing regulations within 60 days for consistency with law and the administration’s policy aims, in conjunction with the Department of Government Efficiency (“DOGE”) and the Office of Management and Budget (“OMB”), and, as necessary, the Attorney General. The agencies are required to identify for deregulation their regulations that fit within any of seven categories:

1. Those that are unconstitutional or those that raise serious constitutional questions, such as the scope of power vested in the federal government by the Constitution:

This category is aimed at regulations that exceed the power of the federal government;

2. Regulations that are based on unlawful delegations of legislative power:

This category stems from the constitutional Nondelegation Doctrine, which has seen renewed interest in recent years by courts and commentators.[3] The Nondelegation Doctrine is the principle that Congress cannot delegate its legislative or lawmaking powers to other entities—including Executive Branch agencies. Historically, to pass constitutional muster, when Congress did delegate to an agency, it was required to do so by providing “intelligible principles” to the agency to guide it in its rulemaking—a relatively lax standard. But in recent years, the Nondelegation Doctrine seems poised to grow some teeth;

3. Regulations that are based on anything other than the best reading of the underlying statute:

This category aligns with the Supreme Court’s decision last term in Loper Bright that overruled the Chevron doctrine—the principle that if an agency’s interpretation of an ambiguous statute was reasonable, even if not the best reading, the reviewing court should defer to the agency. In Loper Bright, the Court held that reviewing courts should not defer to an agency’s interpretation of an ambiguous statute, but may only view such interpretations as persuasive[4];

4. Those that implicate matters of “societal, political, or economic significance that are not authorized by clear statutory language”:

This principle appears aimed at the “major questions doctrine,” announced in 2022 by the Supreme Court’s decision in West Virginia v. EPA, 597 U.S. 697. There, the Court held that an agency may not resolve through regulation a question of “vast economic and political significance” without a clear statutory authorization; 

5. Regulations that impose significant costs on private parties that are not outweighed by public benefits;
6. Those that harm the national interest by “significantly and unjustifiably impeding technological innovation, infrastructure development, disaster response, inflation reduction, research and development, economic development, energy production, land use, and foreign policy objectives”; and
7. Regulations that impose undue burdens on small business and impede private enterprise and entrepreneurship.

These last three categories appear to be aimed at the business interests this administration has expressed an intention to prioritize. (And as such, provide significant opportunities to clients, as addressed below.)

2. The Effect of the Deregulation EO

Upon the expiration of the 60-day review period, the Office of Information and Regulatory Affairs (“OIRA”) is directed to consult with the agency heads to develop a “Unified Regulatory Agenda” to rescind or modify any of the regulations the agency has identified as fitting within the seven categories. In other words, the agencies are directed to deregulate, to the extent their existing regulations fall within any of these seven classes.

Further, the Deregulation EO stresses that agency heads should deprioritize regulatory enforcement of any regulations that “are based on anything other than the best reading of the statute” or those that go beyond the powers of the federal government (classes (1) and (3) above). Agency heads, in consultation with OMB, also are directed to review ongoing enforcement proceedings on a case-by-case basis and to terminate those that “do not comply with the Constitution, laws, or administration policy.”

Finally, the Deregulation EO directs agencies to promulgate new regulations, consistent with the process set forth in a separate EO 12866 for submitting new regulations to OIRA for review, and to consult with DOGE about such new regulations. OIRA is directed to consider the factors set forth in EO 12866 as well as the seven principles set forth in the Deregulation EO. The Deregulation EO also directs the OMB to issue implementation guidance as appropriate.

3.  Takeaways for the Regulated Community

Many businesses are subject to federal regulation, in some capacity. On the one hand, the Deregulation EO affords significant opportunities for the regulated community to take aim at regulations that have proven to be problematic to their business, whether because of costs, technical compliance difficulties, or policy differences. With the Deregulation EO, however, clients now have the opportunity to identify such regulations for rescission and submit them to the relevant agency or to OIRA, along with an explanation as to why the regulation fits within one of the seven categories outlined in the Deregulation EO. 

Furthermore, if a client is subject to an ongoing enforcement proceeding (or the threat of one), the administration directive to agencies to terminate such proceedings on a case-by-case basis provides a similar opportunity for clients to reach out to the relevant agency to engage on the ongoing lawfulness and/or priority goals of that proceeding.[5]

On the other hand, if there are regulations that are particularly beneficial to a given industry, or in which significant time or capital has been invested to further compliance, the industry may want to ensure these regulatory schemes are preserved. For these regulatory schemes, clients may also want to reach out to the relevant agency proactively to explain why such regulations are consistent with the Deregulation EO, in an attempt to avoid the uncertainty or costs that could accompany any roll back.

As I wrote when Loper Bright, Corner Post, Jarkesy, and Ohio v. EPA were handed down last term, the changing administrative state brings both opportunities and risks.[6] Staying proactive in addressing the regulatory regime applicable to a client’s industry is the best way to “take the bull by the horns”—whether that is in an effort to jettison existing, burdensome regulations, or to retain efficient, functional regulations.