Regulatory Freeze

In the lead-up to the general election, then-candidate Donald Trump often repeated campaign promises to massively cut federal regulations that he viewed as stifling growth and killing jobs. True to his word, in his first 200 days in office President Trump has generally delivered on his promise to stymie new federal regulations, including those impacting the maritime industry. Put simply, the pace of regulatory activity has dropped to historic lows. The question becomes: Is this good or bad for the maritime industry?

Changing the Rules

Two of Trump’s initial actions following his inauguration were targeted at deregulation. First, he issued a Presidential Memorandum that imposed a regulatory freeze on all pending regulatory actions and agency policy documents that had not gone into effect as of January 20, 2017. Next, he issued Executive Order (E.O.) 13771 that attempted to offset the number and cost of new regulations under a “two-for-one” regulatory scheme requiring Executive Branch agencies to repeal two rules for every new one issued. Public interest groups quickly challenged the constitutionality of this order, as discussed below.

Then in February Trump tasked each federal agency to form a Regulatory Reform Task Force to evaluate existing regulations and make recommendations on repealing, replacing or modifying unnecessary regulations. And in August he signed an E.O. meant to streamline the federal environmental infrastructure permitting process. The Order implements a “One Federal Decision” policy for major infrastructure projects with a designated lead federal agency for each. This of course comes as the Administration has yet to release a formal infrastructure  proposal.

Admittedly, the regulatory process can be complex and time-consuming and may involve months or even years of review, public comment and revision. But regulations also serve an important function by allowing stakeholders to understand the legal conditions under which they can operate. Rulemaking can also serve as a key measure of how a White House shapes policy. While some business models thrive on reduced regulations, businesses also rely on the certainty of regulations to effectively run their enterprises and attract investment. In either case, tracking regulatory trends is a critical part of operating in the maritime industry, and the current Administration is no exception.

The “Two for One” Rule

In the early months of his presidency Trump relied on the Congressional Review Act (CRA) to repeal 14 rules that former President Obama had finalized at the end of his term. For example, Congress repealed the Obama regulation banning discharges of mining waste into adjacent waters under the so-called “Stream Protection Rule” but narrowly missed repealing the Department of the Interior’s methane waste final rule governing venting, flaring and leaks of natural gas.

CRA authorizes congressional lawmakers for 60 legislative days to undo regulations enacted by the Executive Branch without the risk of filibuster or the need for hearings and committee votes. Once a regulation has been repealed under CRA, the law forbids agencies from reissuing rules that are substantially the same unless Congress subsequently passes a new law and reauthorizes the rules. Prior to President Trump, CRA had successfully been used only once. On May 11, 2017, the CRA window closed.

In response to the President’s directives, federal agencies have been looking for rules to eliminate, which is proving to be a daunting task. In fact, as a collateral effect, agencies are spending an inordinate amount of time on this work while neglecting other duties and responsibilities. To our knowledge, no agency has successfully repealed two regulations in order to create one new one, perhaps because agencies undergo public comment before action is taken and that can take a long time.

The result has been an almost total lack of any significant new federal regulation as agency rulemaking has come to a virtual halt. To illustrate, in the first six months of the Trump Administration the Office of Information and Regulatory Affairs (OIRA) reviewed 67 regulatory actions such as notices, proposals and final rules. Compare that with the first Obama Administration, in which OIRA reviewed 216 actions in the same timeframe.

Additionally, in its first six months the Administration pulled or suspended more than 800 regulations including those related to “Claims Procedures Under the Oil Pollution Act of 1990” and “Tank Vessel Response Plans for Hazardous Substances.” These included 19 regulations with an economic impact of $100 million or more, defined as “significant regulatory actions.”

While Trump pushed for the “two-for- one” mandate as a way to remove outdated rules, his decision may be creating barriers to new and potentially beneficial regulations. And, as noted earlier, public interest groups quickly filed a complaint challenging its constitutionality in Public Citizen Inc. et al. v. Donald Trump et al., case number 1:17-CV-00253, in the U.S. District Court for the District of Columbia. We are closely monitoring the outcome.

Maritime Agency Initiatives

OIRA, under its new Director, former George Mason Associate Law Professor Neomi Rao, is the principal agency that will decide the fate of new regulations. In the meantime, several maritime and environmental agencies have released their respective Semiannual Regulatory Agendas that summarize current and projected significant rulemakings, existing regulations and completed agency actions.

> U.S. COAST GUARD

The Coast Guard’s Semiannual Regulatory Agenda includes the following proposed rules – assuming it can overcome the “two for one” hurdle: a proposal for seafarers’ access to maritime facilities; a proposal regarding numbering of undocumented barges; continuation of a longstanding effort to revise the Coast Guard’s Outer Continental Shelf regulations, and a proposal for implementation of 2010 and 2012 legislation regarding commercial fishing vessels.

At least two federal advisory committees, the National Maritime Security Advisory Committee and the Navigation Safety Advisory Committee, have already begun work to provide input to the Coast Guard in support of its regulatory reform effort. Given the amount of time and resources the Coast Guard is dedicating to complying with the White House’s regulatory policies, the maritime industry should expect that in the near term the Coast Guard will likely continue to operate under current or reduced regulations as opposed to any newly developed ones.

> CUSTOMS AND BORDER PROTECTION

CBP’s Semiannual Regulatory Agenda includes limited examples of significant activity beyond a proposal regarding importer security filing and additional carrier requirements. Notable, though, is what’s not included with the CBP version – any action on interpreting the Jones Act for oil and gas activities on the Outer Continental Shelf.

On May 10, 2017, CBP withdrew a controversial proposal that would have upended decades of precedence in the offshore oil and gas industry. Announced in the final days of the Obama Administration, the proposal would have done away with decades of exemptions by CBP that allowed international maritime companies and their crews to perform work in the Gulf and not be subject to the restrictions of the Jones Act. These companies are now urging CBP to undertake a rulemaking to eliminate the uncertainty of the proposed and final CBP notices.

> MARITIME ADMINISTRATION

MARAD reported no significant rules although it continues to develop several, such as those related to the Marine Highway Corridor Expansion, American Fisheries Act and a Subchapter Update to the National Shipping Authority Regulations.

In addition, the Maritime Security Program Extension rulemaking would implement the requirements of the 2013 National Defense Authorization Act (NDAA). According to OIRA, the NDAA: “(1) extended the sunset date of the Maritime Security Program (MSP) to September 30, 2025; (2) directed MARAD to offer to extend existing MSP operating agreements to current MSP participants before an open competition; (3) authorized periodic stipend increases; and (4) prioritized awarding of new MSP contracts according to Department of Defense priorities.”

This proposed action would bring the MSP up to date by modernizing the current implementing regulations. MARAD is also seeking public comments on Title XI Obligation Guarantees under 46 CFR Part 298. The information to be collected will be used to evaluate an applicant’s project and capabilities, make the required determinations and administer any agreements executed upon approval of loan guarantees.

We wonder what existing MARAD rules the new Administrator, Retired Navy Rear Admiral Mark Buzby, will repeal in order to issue the new regulations at no additional cost. In other words, whether MARAD has to repeal two existing regulations to implement the NDAA amendments remains to be seen.

Good or Bad?

At the 200-day mark the pace of regulatory activity under the current Administration has dipped to historic lows, which presumably was the intent of the “two-for-one” rule. For some in the maritime industry, this comes as a welcome relief. But for others, the lack of regulations is viewed as an impediment to investment, innovation and improvements to public safety. Stakeholders should continue to monitor current regulatory rulemaking impacting the maritime sector and seek opportunities to comment to shape those regulations.

On a final note, the Trump Administration – confronted with the aftermaths of two powerful hurricanes in Harvey and Irma – has been forced to issue an extended Jones Act waiver. The storms may even force a rethinking of the repeal of Executive Orders dealing with climate change and flood control in disaster-prone areas. We will continue to monitor and report on these developments and have issued a Jones Act advisory on the waiver extension.   MarEx