The Executive Brief – Best Practices to Understand and Manage Risks Caused by Regulatory Upheaval

Summary

Upon taking office, President Trump directed federal agencies to freeze all new regulations pending review and to eliminate ten regulations for every new one going forward. As the new Congress convenes, federal legislators are moving to block certain recently enacted Biden era regulations through Congressional Review Act authority.

At the same time, through a flurry of executive actions, President Trump swung the pendulum on U.S. social, economic, environmental, domestic and international policy priorities, and directed federal agencies to remake their agencies accordingly. Although most regulatory actions require agencies to follow a public-facing rulemaking process, there are plenty of actions that new agency leaders can take, or refrain from taking, that have profound effects on the regulatory landscape. For instance, federal agencies have significant discretion over regulatory enforcement.

Amidst the chaos of breaking news, companies are struggling to discern signal from noise so that they can identify and manage risk. This article provides readers with the basic information necessary to understand and track current events, interpret how those developments impact businesses and defines a process to make time-sensitive decisions based on an organization’s unique situation and risk tolerance.

Fundamental concepts: What are federal regulations and how are they made?

The term “regulation” and “rule” are used interchangeably and describe a statement issued by an agency, board or commission that has the force and effect of law. Typically, Congress enacts legislation and grants agencies the authority to adopt rules to implement and enforce those laws. Some Congressional acts require an agency to make a regulation; other acts give an agency the discretion to make regulations.

Generally, federal regulations are created through a process called “rulemaking,” which is governed by specific procedures defined under the Administrative Procedure Act (APA), including public notice and comment periods. The APA applies to all “authorities” of the U.S. Government, including executive branch agencies and independent regulatory agencies, but excludes Congress and the judiciary.

Not all types of executive actions are subject to the APA. For example, rules concerning military or foreign affairs are exempt, as are rules concerning agency management and personnel. Rules related to public property, loans, grants, benefits or contracts are also exempt from APA – which means that changes to the procedures through which contracts or grants are distributed and the rules governing those agreements can be changed outside of the APA. Finally, new rules can duck APA for “good cause,” allowing the agencies to issue “interim final rules,” – this is the most common tool that agencies use to avoid rulemaking.

To repeal a federal regulation subject to APA, the agency must initiate a new rulemaking process and issue a new regulation that explicitly repeals the existing one. Making and repealing rules under the APA takes a long time.

Non-legislative rules, like interpretive rules and policy statements, are not subject to APA, and they also generally do not carry the force of law that APA regulations carry. The nonpartisan federal Congressional Research Service (CRS) is an excellent resource for readers interested in learning more about the basic concepts of federal agency authority and the detailed process for rulemaking.

Overview Of Current Regulatory Changes

To understand the shifting regulatory landscape, divide regulations into 4 categories:

1. Durable
2. Vulnerable
3. Pending
4. Future

Durable Regulations - Final Rules

Published Before August 1, 2024

Final rules published before August 1, 2024, through the APA rulemaking process are most likely to withstand the current burst of activity because they can only be repealed through the APA process and cannot be unwound through the fast-tracked Congressional review process outlined below. As with other outgoing administrations, the Biden Administration sprinted to issue final rules last spring to avoid CRA deadlines, even breaking records for this “regulation blitz.”

Vulnerable Regulations - Final Rules

Published After August 1, 2024

Final rules that were published in the last months of the Biden Administration are vulnerable to cancellation through the Congressional Review Act (CRA), which allows Congress to overturn recent federal rules with a simple majority vote in the House and Senate, followed by Presidential approval of joint resolutions of disapproval. The regulations that are vulnerable to CRA include all rules finalized after August 1, 2024. Since its creation in 1996, CRA has been used to overturn 20 rules, including 16 Obama-era rules after Trump took office in 2017 and three Trump-era rules when Biden took office in 2021.

There are almost 1,300 rules vulnerable to CRA review, which can be viewed on the Congressional Review Act Window Exploratory Dashboard created by the GW Regulatory Studies Center. Organizations like Public Citizen are tracking the rules they believe are more likely to be challenged under the CRA. It will not be long before Congressional leaders make their CRA priorities clear. Senate Majority Leader Thune stated they are targeting up to 15 regulations to kill through CRA. But watch for CRA efforts that are not part of a coordinated effort, like the proposal by Congressmen John Moolenaar and Jared Golden of Michigan who introduced a bill last November to block the Treasury rule on section 45X advanced manufacturing tax credit.

The National Conferences of State Legislatures is tracking CRA resolutions to overturn regulations. As of February 10, 2025, the NCSL tracker showed seven rules for which joint resolutions of disapproval had been introduced, including Department of Energy (DOE) rules under the Energy Conservation Program regulating Commercial Water Heating Equipment, Walk-In Coolers and Freezers, and Consumer Gas-Fired Water Heaters; Environmental Protection Agency (EPA) rules for Drinking Water Regulations For Lead and Copper: Improvements (LCRI), which requires drinking water systems across the country to identify and replace lead pipes within 10 years, and banning TCE (trichloroethylene) under TSCA; and Internal Revenue Service (IRS) rules implementing a new digital asset transaction reporting regime through regulating brokers of digital asset sales.

Pending Regulations

Subject to Regulatory Freeze

The regulatory freeze memo requires that federal agencies take the following steps regarding pending regulations:

1. stop rules not yet officially proposed or issued
2. withdraw proposed rules that are not yet published
3. postpone for 60 days new rules that are published but not yet in effect
4. review postponed rules and, if they raise “substantial questions of fact, law or policy,” do not release them without approval from the White House.

The regulatory freeze applies to all substantive actions by agencies, including actions under the APA rulemaking process and other agency policy statements and interpretive documents, on statutory, regulatory or technical issues.

The freeze is likely to impact a wide variety of pending rules, including USDA rules banning red dye No.3 in food and ingested drugs and regulating the nutrient content claim “healthy”; Department of Labor (DOL) rules by the Occupational Safety and Health Administration (OSHA) addressing Heat Injury and Illness Prevention in Outdoor and Indoor Work; and the Department of Justice (DOJ) rule Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern which prohibits and restricts certain data transactions with certain countries or persons.

Future Regulations

10-to-1 Repeal Mandate

Within the Executive Office of the President is the U.S. Office of Management and Budget (OMB) which oversees the performance of federal agencies and administers the federal budget. Under OMB is the Office of Information and Regulatory Affairs (OIRA), which hosts a Regulatory Review Dashboard of all pending regulatory actions. Twice a year the President adopts a Unified Agenda of Regulatory and Deregulatory Actions, which aggregates regulatory actions that administrative agencies plan to issue in the near and long term.

Going forward, through the deregulation executive order the Trump Administration aims to reduce the cost and complexity of federal regulations by requiring that for every one new regulation, an agency must repeal ten regulations. This 10-to-1 Rule is much more ambitious than Trump’s 2-for-1 effort in 2017. The order mandates that the total incremental cost of all new regulations must be “significantly less than zero” and directs OMB director to figure out how to measure this.

Explicitly exempt from the 10-to-1 Rule are: regulations impacting the military, national security, homeland security, foreign affairs or immigration; regulations related to agency organization, management or personnel; and other regulations at the discretion of the President.

The current Unified Agenda is Biden’s Fall 2024 Agenda, so watch for a substantially different Spring 2025 Agenda in the coming months. Trump’s Spring 2025 Agenda will define the regulations targeted for repeal and planned for enactment. Under the 10-to-1 Rule, agencies may only issue rules that are included in the Regulatory Agenda, and those rules must be reviewed in advance against the no cost mandate.

The Signals

For durable regulations impacting business, observe if the Trump Administration chooses to repeal them or stop enforcing them. In addition, watch for Congressional efforts to change the authorizing legislation and potential legal challenges from impacted stakeholders.

Vulnerable regulations targeted for elimination by Congress will be identified in the coming weeks. Pay attention to information about proposed joint resolutions of disapproval and coordinated efforts by Republican Congressional leaders.

Whether frozen pending regulations are ultimately released will depend on their alignment with Trump Administration policy priorities. For some rules, their fate is obvious (e.g., Energy Conservation Program), but for other rules (e.g., DOJ data transactions rule), we must wait and see.

To monitor the evolution of future regulatory and deregulatory priorities, watch for Trump’s Spring 2025 Regulatory Agenda.

Recommendations

We are all standing in the same storm of regulatory upheaval, but we are not experiencing the same effects. From the small manufacturing business deciding whether to put a down payment on long lead time orders for renewable energy projects, to the environmental testing company navigating durable new regulations known to be disfavored by the Trump Administration, to the public company with a significant government contract portfolio assessing risk disclosure obligations, to the university with hundreds of federal research grants, to the startup designed to provide solutions to regulated businesses, the practical impacts of regulatory uncertainty are vast.

Regardless of specific situations, I recommend all organizations assess their risk environment, decide how they will decide and then stay grounded and trust the process.

Step 1: Assess Your Risk Environment

To navigate risks, they must be defined. Consider the following:

1. What types of regulations matter to your organization and which agencies are responsible?
2. Are those regulations durable, vulnerable or pending?
3. Are those regulations contrary to Trump Administration policies and priorities?
4. What is the enforcement environment? Who has enforcement authority? Is it held only by the executive agency, or can courts enforce it through lawsuits filed by individuals or competitors or others?
5. Are there similar regulations at the state or local level? How do those requirements impact the ongoing compliance obligations or regulatory constraints of your organization?
6. What are all the actual costs of regulatory compliance today, this year and in future years?
7. How do those costs compare to the risks of noncompliance today, this year and future years?
8. Which stakeholder perspectives must be factored into the risk assessment (e.g., investors, stockholders or employees)?
9. What are your company values?
10. What else goes into your risk calculus?

Step 2: Decide How You Will Decide

Once you have defined the risk environment facing your business, then it is time to wrestle with those risks and chart a course based on your unique situation and risk tolerance.

Consider the following:

• Establish standard operating procedures (SOPs) to guide your response to regulatory changes over time. Using a defined process helps ensure your organization cuts out the noise and only uses signals to work through decisions.
• Create a decision tree to help your organization navigate dynamic risks and make sound decisions that align with your organization’s values and risk tolerance.
• Equip professionals throughout your organization with the tools they need to make decisions that are appropriate to their level of authority and discretion.

Step 3: Stay Grounded and Trust Your Process

Amidst the chaos of breaking news, follow your SOP, work the decision tree and trust your professionals to make good decisions.

Conclusion

Making executive decisions during times of regulatory uncertainty is fraught with risk. The Executive Brief team at Fredrikson is here to help you discern signal from noise, gain actionable insight and make time-sensitive decisions with confidence. We welcome the opportunity to help you navigate regulatory risks and find strategic clarity.