The Impact and Potential Impact of Executive Orders and White House Memos on the STB and Other Independent Regulatory Agencies
Since taking office in January, President Trump has been actively using his executive powers to direct the course of government activity. Of note are:
- On Inauguration Day, January 20, White House Chief of Staff Reince Priebus issued a Memorandum directing agencies to delay any new regulations by sixty days to permit further review. This Memorandum can be accessed here.
- On January 30, President Trump issued an Executive Order that directed agencies to, among other things, eliminate two regulations for every new regulation they wish to issue and also not impose additional costs on the entities that they regulate.This seems to be aimed towards those regulations that are promulgated without statutory authority (or Congressional direction). This Executive Order can be found here.
Three days later, on February 2, the White House issued a memorandum providing interim guidance on the Executive Order.
- On February 24, President Trump issued an Executive Order that required each agency head to designate an agency official as its Regulatory Reform Officer (RRO) to oversee regulatory reform implementation and ensure these reforms and policies are consistent with applicable law.
Additional orders and guidance are likely to follow.
One of the many questions that have arisen is whether these directives apply to agencies such as the Surface Transportation Board (STB or Board).
The simple answer is that the STB is an independent regulatory agency. As such, it is not directly subject to such orders. In practice, however, the STB will likely be very sensitive to the spirit as well as the letter of such orders.
For example, the STB on January 27, under the leadership of Ann Begeman, whom President Trump designated as Acting Chairman two days earlier, delayed the effective date of its permanent railroad performance reporting rules in Ex Parte No. 724 for 60 days. In this case, the STB adhered to the Priebus memorandum while noting that it was an independent agency, implying that the Board was not technically subject to the directive.
The STB followed a similar course in 2011 after President Obama issued Executive Order 13563, directing executive agencies to review their regulations to see if they should be modified, streamlined, expanded, or repealed so as to make the agency’s regulatory program more effective or less burdensome in achieving the regulatory objective.
The Board conducted a regulatory review, but stated its independence when informing the Executive Branch of its plan to voluntarily comply with this Executive Order 13563. Click here for the 2011 STB Letter.
The Memorandum on Interim Guidance issued by the Trump Administration on February 2 also appears to confirm that independent agencies are not directly subject to the orders. The Memorandum referenced Executive Order 12866 from 1983, as well as 45 U.S.C. 3502, which lists the Interstate Commerce Commission (the STB’s statutory predecessor) among the independent agencies.
Significantly, public interest, environmental, and labor interests filed a complaint on February 8 challenging the two-to-one Executive Order. They directed their complaint only to executive agencies such as the Federal Railroad Administration and the Environmental Protection Agency, and not to independent agencies such as the STB. The fact that independent agencies such as the STB and the Federal Energy Regulatory Commission were not included provides further confirmation that they are not directly subject to the Administration’s directives.
Nonetheless, independent agencies may be inclined to follow guidance that may not be directly binding upon it – for instance, the Board’s decision to delay implementing (without reviewing or reevaluating) the permanent railroad performance reporting rules.
Failure to adhere voluntarily to non-binding guidance could result in adverse consequences for the agency, such as reductions in funding, which could mean staffing cuts and further difficulty in the STB upgrading its IT infrastructure and adequately meeting its new responsibilities including supporting two new Board Members (as allowed for under the STB Reauthorization Act of 2015).
Furthermore, Acting Chairman Begeman may have had her own reservations about the new data collection rules, which were adopted when she was a minority member of the Board.
The Executive Order’s requirement that new regulations pose no additional incremental cost for regulated entities poses significant risks for any pro-shipper reforms that the STB might otherwise seek to undertake. The Association of American Railroads was quick to claim that any changes in the status quo would result in increased costs to railroads and make it more difficult and costly for them to provide service to their customers. This argument is in addition to the allegation by railroads that pro-shipper reforms would be a return to the “bad old days” of onerous government regulations.
As noted, this Executive Order is being challenged in court on the ground that it cannot override substantive law that governs agencies and that failure to act in accordance with the governing law in order to comply with the Executive Order would be arbitrary and capricious and contrary to law. Those claims may be premature because no agency has yet taken action in accordance with the Executive Order.
There are, however, a number of ways in which the impact of the Executive Order on the STB might be limited. In particular, the STB acts in various ways that do not involve regulations, such as determinations in rate cases and other adjudications, issuances of declaratory orders, issuances of guidelines and policy statements, and its new power (as a result of the STB Reauthorization Act of 2015) to initiate investigations.
FRCA believes the statutory requirement that rates for captive shippers must be reasonable should not be repealed. In addition, the STB conducts rulemaking proceedings that do not entail the issuance of formal regulations, although the letter and certainly the spirit of the Executive Order may include such proceedings.
In short, the STB’s “voluntary” compliance with White House directives presents a number of potential complications and further demonstrates that the perception of power is often just as important as actual power in Washington.
