In early October, President Donald J. Trump issued two executive orders aimed to further his administration's stated goal of reducing both executive agencies' power and burdens on regulated entities. Both executive orders will affect how federal agencies issue informal guidance documents, through which agencies provide interpretation or clarification of regulations they have promulgated.

The first, the "transparency and fairness" executive order, clarifies that guidance documents may not be used as a basis for imposing requirements or standards of conduct on any regulated entity. It also states that agencies may only take enforcement actions or engage in adjudication in reliance on standards of conduct that have been made publicly known, and may not do so in ways that may cause "unfair surprise." In addition, prior to taking any action having a legal consequence as to any regulated person or entity, an agency must give that person or entity an opportunity to contest enforcement.

The second, the "improved agency guidance documents" executive order, requires agencies to post all guidance documents online, in a searchable format, along with a disclaimer that they are simply guidance and lack the force and effect of law. As part of this process, agencies are to review current guidance to determine whether it should be rescinded; any guidance not posted online as required within 120 days will be considered rescinded. Additionally, the Office of Management and Budget will establish procedures whereby the public may petition for withdrawal or modification of any particular guidance document. Perhaps the most substantial change required by the executive order is the requirement that no "significant" guidance documents may be issued without being subject to a period of public notice and comment, akin to the Administrative Procedure Act's (APA) requirement for agencies issuing formal, binding regulations. Significant guidance documents must also be reviewed by the Office of Information and Regulatory Affairs before issuance.

The president's stated rationale for issuing these two executive orders is a concern that agencies are abusing their regulatory power and effectively becoming a "fourth branch" of government. Specifically, agencies are abusing their ability to issue nonbinding guidance documents or interpretations of regulations, and using this process to make changes to regulations outside the formal notice-and-comment requirements of the APA. Without these requirements being adhered to, the regulated community has no say in the rulemaking process and may be blindsided by procedurally deficient, substantively onerous rules. The White House specifically cited the Environmental Protection Agency's (EPA) assessing fines against a Wyoming rancher for building a livestock pond on his property, and fining and jailing a Montana man for building ponds on his property, as examples of the overreach targeted by these executive orders. Both of these disputes arose out of the EPA's interpretation of the Clean Water Act, and the regulated parties' disagreement with these interpretations. The executive orders are intended to clarify legal requirements in cases like these.

As intended, the executive orders may indeed lead to more clarity for the regulated community. Guidance documents are not legally binding. While they do provide notice and explanation of an agency's interpretation of its regulations, they are not a guarantee that an agency will take a particular position in an enforcement action, or that a court will uphold the agency's stated interpretation in adjudicating disputes over regulations. If issuance of major guidance documents is subject to public notice and comment, the end results will likely be more clearly understood by the regulated public, and the regulated public's concerns may be reflected in the ultimate guidance issued. The requirement that all guidance documents be consolidated and published online may also lead to a more informed public. However, these changes may also leave questions unanswered. Courts have long recognized that statutes and regulations are often ambiguous; it is an agency's role to try to resolve that ambiguity, often through the issuance of guidance documents or interpretations. Guidance documents provide value to the regulated community, as they clarify otherwise ambiguous requirements. Guidance documents are also issued reactively—in response to new technologies or newly discovered problems that don't fit squarely within the existing regulations. Agencies have relied on guidance documents in responding to the opioid crisis and the recent surge in sales of flavored electronic cigarettes to youth, for example. The informal, nonbinding nature of guidance documents allows them to be issued quickly and efficiently, in response to sudden challenges and questions from the regulated community. The notice and comment process is lengthy, and requires the dedication of time and resources. Agencies may, therefore, be forced to prioritize—to dedicate their resources toward clarifying regulations through public notice and comment, or to focus on enforcing existing—if potentially ambiguous—regulations. If the issuance of new guidance documents is slowed, litigation may increase as regulated entities attempt, and sometimes fail, to comply with ambiguous regulations.

The two executive orders lead to other questions, as well. The "improved agency guidance documents" order defines "significant" guidance documents—those requiring notice and comment before implementation—but the definition is somewhat vague. Criteria indicating a guidance document is "significant" include that the document is reasonably anticipated to "raise novel legal or policy issues," or "materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations of recipients thereof." Whether these criteria are met with regard to any particular proposed guidance document will be determined by the Office of Information and Regulatory Affairs—which will also be responsible for reviewing any significant guidance documents before publication.

There is also the question of whether these changes will have a lasting effect. Executive orders may be issued, or rescinded, by the president without public notice and comment. Therefore, a future president could reverse these changes at will. In addition, the pronouncement that agency guidance documents are not legally binding does not change the regulatory landscape—it is an acknowledgement of existing law. As the U.S. Supreme Court reiterated just this summer, in Kisor v. Wilkie, courts generally defer to an agency's reasonable interpretation of its own regulations—those interpretations are often contained in guidance documents. This concept is referred to as Auer deference. There are limitations to Auer deference, however. The agency's interpretation at issue must be its official, authoritative position, not an ad hoc statement pertaining to a unique instance. And the court in Kisor clarified that Auer deference cannot be used to give interpretive rules or agency guidance binding, precedential authority. To the extent the executive orders proclaim that guidance documents are not legally binding, they do not change the status quo.

As discussed above, in justifying these executive orders, Trump cited what he considers abuses of power by the EPA. The executive orders are purportedly intended to curtail this sort of agency overreach. However, the EPA—and other agencies—often use informal rulemaking to clarify the extent and nuances of existing regulation, providing regulated entities with clearer direction on how to comply with legal requirements and avoid enforcement actions, fines and other repercussions. The EPA has also used guidance and interpretation to walk back statutory or regulatory requirements, to the benefit of the regulated community. For example, the EPA has used guidance documents in the past year to streamline its definition of "ambient air" under the Clean Air Act, and to ease new source review permitting requirements under the same statute.

The extent of these executive orders' effects on both the regulated and the regulators remains to be seen. What is likely to ensue, at least, is an increase in the time and money executive agencies must invest in issuing guidance documents. This may ultimately lead to more clarity for the regulated entities, and for courts, or it may not.

Kathleen M. Kline is a litigator in the environmental practice of Greenberg Traurig. She focuses on complex matters including environmental litigation, securities and derivative actions, and financial services litigation. Contact her at [email protected].