If the Federal Energy Regulatory Commission and other agencies implement executive orders to sunset energy regulations without careful analysis, Then the agencies may depart from decades-long precedent and face legal and practical challenges.
On April 9, 2025, President Donald Trump signed Executive Order 14270, which calls for sunsetting existing energy regulations based on stated perceptions of a regulation’s outdatedness. The term “sunsetting” refers to laws or policies that automatically terminate unless some affirmative action is taken to preserve them. The order exempts regulatory permitting programs authorized by statute and regulations labeled as “deregulatory.” This executive order is potentially far reaching, but it leaves many questions.
The order applies to the Federal Energy Regulatory Commission (FERC), the US Nuclear Regulatory Commission, the US Department of Energy, the US Environmental Protection Agency, and subcomponents of the US Department of the Interior and US Army Corps of Engineers for regulations issued pursuant to various federal energy-related statutes, including the Federal Power Act of 1935, Natural Gas Act of 1938, Atomic Energy Act of 1954, and Energy Policy Act of 2005. The order directs each agency to issue a rule by September 30, 2025, that would add a conditional sunset date to all existing energy-related regulations covered by the order.
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The sunset date for existing regulations is to be one year after the agency issues its sunset rule. Prior to the expiration of each regulation, any agency that’s affected must provide an opportunity for the public to comment on the costs and benefits of the regulation, after which the agency will decide whether to terminate or to extend the regulation for not more than five years. Thus, the order seems to direct agencies either to allow a covered regulation to expire on its sunset date or to extend the regulation for not more than five years; the order does not include a clear option for agencies to continue a regulation beyond five years. Like all executive orders, this order only sets policy for the executive branch and does not change agencies’ existing legal authority or obligations.
Regularly revisiting regulations is good policy in theory, but assessments still need to be conducted before repealing an existing rule.
In the abstract, reevaluating existing regulations is good policy. Every regulation is issued in response to certain then-existing conditions and pursues certain policy objectives. Agencies should periodically reevaluate whether their regulations continue to be effective and efficient in light of new circumstances, accumulated evidence about whether a regulation is achieving its aims, and evolved policy goals. This exercise is termed “retrospective analysis;” Resources for the Future has published blog posts and other publications on the topic and has hosted related events.
If a regulation is not accomplishing its objectives, and better options exist, then the regulation should be amended to address its defects or repealed and replaced with something better. For this reason, previous presidential administrations also have directed administrative agencies to review their existing regulations, and agencies such as FERC have implemented targeted regulatory reviews. In response to their regulatory reviews, agencies sometimes take steps to correct problems, such as when FERC amended its regulations to eliminate reporting requirements for public utilities that it determined were unnecessarily burdensome.
This administration’s idea of sunsetting regulations, however, goes beyond just reviewing existing regulations. The executive order set a presumption that existing regulations will be terminated unless the agency takes affirmative action to preserve them. This strategy may seem appealing to a presidential administration with a strong deregulatory agenda, but it is difficult to manage successfully.
Regulatory changes at the Federal Energy Regulatory Commission could be particularly disruptive for the energy industry.
In the energy sector, many FERC regulations have been in force for decades, and industries have invested billions of dollars in energy markets that rely on those regulations. Landmark FERC regulations such as Order 888 and Order 636 created new energy markets for electric power and natural gas, respectively. Numerous orders since then have established additional rules for the operation of these markets.
Collectively, these FERC rules have reorganized the structure of transactions in electricity and natural gas sectors over the course of several decades. The industries that operate under these regulations are extensive—for example, US electric companies generate and sell about $500 billion of electricity annually. Even if the existing market rules and other regulations are not optimal, abruptly abandoning those regulations may disrupt markets, causing more costs than the benefits of repeal.
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The prospect of major regulation changes every few years introduces substantial regulatory uncertainty that could discourage the new investments that are necessary to meet anticipated higher levels of electricity demand in the coming years due to investment in new data centers, possible onshoring of manufacturing, and electrification of homes and vehicles. In addition, figuring out what regulations should replace the sunsetted regulations would be a monumental task.
For these reasons, it seems unlikely that FERC would let its major regulations expire. But even the burden of having to reissue those regulations every five years, as the executive order seems to contemplate, would be severe.
The Administrative Procedure Act requires a process before repealing a regulation.
To get into the details, agencies face legal limitations on their authority to sunset regulations. Terminating a regulation generally requires repealing it through the rulemaking process as spelled out in the Administrative Procedure Act.
This act requires agencies to publish a proposed rule that explains the rationale for the agency’s proposed new regulation, to provide the public with an opportunity to comment on the proposed rule, and then to issue a final rule that includes an explanation of why the agency did or did not make any changes to the proposed rule in response to the comments. Stakeholders that disagree with the final rule may sue the agency in court. This rulemaking procedure and opportunity for judicial review applies equally to new regulations, to rules amending existing regulations, and to rules repealing existing regulations.
Thus, to comply with the Administrative Procedure Act, any agency seeking to repeal an existing regulation must go through the notice-and-comment rulemaking process, justify its decision to repeal, and then potentially face litigation that challenges its decision to repeal. Courts are unlikely to allow agencies to terminate a regulation through sunsetting without going through the rulemaking process.
Moreover, recent Supreme Court cases reducing the deference that courts give to agency legal interpretations may make it more difficult for agencies to prevail in court when defending their decision to repeal a regulation. Defending a decision to terminate a regulation—as opposed to justifying the adoption of a new regulation—is especially challenging because a repeal involves reversing an agency’s prior rule and its supporting reasoning, a circumstance in which courts are particularly skeptical of agencies.
Different regulatory bodies have varying capacities for assessment.
Requiring agencies to evaluate broad swaths of their existing regulations will test the capacity of even well-funded and well-staffed agencies.
The task of evaluating existing regulations, especially in a manner that will survive judicial review, requires careful analysis of regulatory impacts that are sometimes difficult to discern. Stakeholders are likely to disagree with each other and offer competing data and analyses—along with political pressure—to support their positions. The extensive effort invested in reevaluating existing regulations may overwhelm agencies with limited staff and budgets. Furthermore, regulations that could genuinely benefit from thoughtful reform may fall through the cracks as agencies need to spread their energy and resources across many fronts.
Reevaluating existing regulations also diverts resources from any new initiatives an agency may want or need to pursue. For example, FERC has a busy agenda of proposed infrastructure projects that require the agency’s approval. The federal rulemaking process generally takes two to three years to complete. As a less burdensome alternative to sunsetting and repealing, agencies may want to consider creating dynamic regulations that can adjust automatically in response to changing conditions such as cost, alleviating the need to go through the rulemaking process for each change in a rule.
Regulatory assessments should consider a range of potential policy actions, not just blanket deregulation.
Finally, sunsetting—rather than merely reevaluating—regulations is a blunt instrument that deprives agencies of important options for improving policy. Sunsetting terminates a regulation, full stop.
Even when a regulation has shortcomings, agencies often may be able to correct inadequacies by amending the existing regulation rather than eliminating it altogether. An automatic repeal through sunsetting presents the risk that agencies may—due to lack of time, attention, or resources—let potentially worthwhile regulations expire rather than search for ways to improve them. Sunsetting thus can be an impediment to beneficial policy reform.
Proceed with caution.
Federal agencies will have to proceed cautiously with implementing the executive order, working within established administrative processes to identify rules that may warrant reconsideration. Early signs indicate that FERC is taking such an approach. If the agency continues to move forward carefully, FERC may avoid controversy and reduce its litigation risks. Until agencies’ approaches become clear, industry and other stakeholders are likely to remain anxious at the prospect of major regulatory disruptions.
For more timely insights about developments in environmental and energy policy, browse the If/Then series.
