Regulatory zig-zag

Oct. 30, 2017
Taming by US President Donald Trump of the administrative beast he inherited, mistakenly called deregulation, solves many problems but creates others. Trump is not deregulating; he's unshackling.

Taming by US President Donald Trump of the administrative beast he inherited, mistakenly called deregulation, solves many problems but creates others. Trump is not deregulating; he's unshackling. For that he deserves credit. He shows, however, that what a president zealous for regulation can assemble, a differently inclined chief executive can dismantle. And if nothing changes, some future president-maybe Trump's successor-can start the dangerous cycle anew.

That's a problem.

Reversing excesses

With laudable help from Congress, Trump has reversed many of Obama's excesses. Among rules directly affecting oil and gas, Trump by executive order rescinded a measure likely to have increased the royalty rate for federal oil and gas leases and another rule expanding federal regulation of hydraulic fracturing. He is trying to lift regulations on emissions of methane from new wells and methane venting, flaring, and leaks from existing equipment. His Environmental Protection Agency recently issued a directive limiting the "sue and settle" strategy under which pressure groups and an obliging EPA dodged public comment while toughening environmental regulation. And his Department of Interior is making federal land leasable for oil and gas exploration again outside traditional areas.

Congress early this year passed resolutions under the Congressional Review Act nullifying Obama-era measures that required US oil and gas companies to disclose payments to foreign governments and that added to bureaucratic impediments to federal leasing. And in two major steps not specifically related to oil and gas but important to the industry nevertheless, Trump moved to withdraw from the Paris Agreement on climate change and to repeal the Clean Power Plan regulating greenhouse gas emissions by electric power generators.

For the first 9 months of a presidential term, this record is impressive. It is not, however, the work of a chief executive deeply committed to limited government and market freedom. Trump's Department of Energy recently recommended electricity-rate reform favoring generation by coal and nuclear energy. And under pressure from farm-state lawmakers, Trump reportedly has instructed EPA not to make cuts proposed earlier this year in biofuel requirements. Trump dislikes overregulation-except when it helps him politically.

On balance, the swing away from a constitutionally questionable exertion of control by the federal government is constructive. It helps the economy in general and the energy industry in particular. But it's still a swing. The president after Trump might be as disposed toward regulation as Obama was. Businesses must account in their planning for this possibility.

Regulatory gyration will remain a nagging business risk while politics remains polarized and presidents govern energetically by executive order. While the antidote for polarization isn't anywhere in sight, Congress can do something about presidential expansionism. In fact, it should.

Lawmakers this year have filed bills addressing problems made evident by the Obama-era's regulatory surge. The Regulatory Accountability Act of 2017 (RAA) is said by some observers to have the best hope for enactment. Passed by the House of Representatives, the bill changes federal rulemaking under the Administrative Procedures Act to require agencies to base preliminary and final factual determinations on evidence and to consider other matters, such as legal authority, several dimensions of the need for new rules, and prospective costs in relation to benefits. The legislation also attempts to increase the specificity of judicial review of regulations and of agency authority.

Clarifying authorities

The oil and gas industry should welcome this effort by Congress to clarify authorities and set statutory boundaries on regulatory activity. The RAA might not be the best solution. But it's the product of a Legislative Branch struggling to reclaim jurisdictional ground lost over several decades to the other two branches of government.

Obama unabashedly said he'd preside by executive order when Congress wouldn't enact his activist agenda. Trump is unabashedly canceling the results. Congress can stop the regulatory zig-zag by reasserting its institutional prerogatives and passing laws that limit room for administrative and judicial interpretation. An industry ill-served by uncertainty should hope that it will.