Trump’s Rapid Deregulatory Plan Tested in Energy Rule Rollback

The Department of Energy’s move to nix a loan-program rule marks the Trump administration’s first attempt to use US Supreme Court precedents to justify quickly scrapping regulations.

DOE said that it’s eliminating a rule governing a program for providing loans to minority-owned businesses because it conflicts with Students for Fair Admissions v. Harvard, the high courts 2023 decision ending race-based affirmative action programs in college admissions.

President Donald Trump included Students for Fair Admissions on his list of 10 recent high court rulings in an April 9 memorandum, saying agencies should invoke them to summarily invalidate regulations. His administration could significantly increase the speed of its deregulatory campaign if courts allow agencies to sidestep the lengthy, resource-intensive process normally necessary for ending rules.

But DOE’s initial bid to follow Trump’s speedy deregulatory strategy reveals its vulnerabilities, legal scholars said. It appears susceptible to being toppled in court because the agency is skipping mandatory rulemaking procedures and relying on a broad reading of the affirmative action decision that hasn’t been tested, they said.

“The administration is definitely daring people to challenge them and hoping they get away with it,” said Renée Landers, a Suffolk University administrative law professor

Trump argued that agencies could use the Administrative Procedure Act’s good cause exception to its notice-and-comment requirements when they determine rules are unlawful under any of the 10 high court decisions. The Department of Energy didn’t respond to requests for comment.

Direct Final Rule

DOE announced it would repeal the loan-program rule—which establishes procedures for minority-owned business to obtain financial assistance to defray the cost of contracting with the department—along with 46 other deregulatory actions May 12.

“Thanks to President Trump’s leadership, we are bringing back common sense—slashing regulations meant to appease Green New Deal fantasies, restrict consumer choice and increase costs for the American people,” Energy Secretary Chris Wright said in a statement. “Promises made, promises kept.”

The department published a direct final rule May 16 to rescind the loan-program regulation. The repeal is set to take effect July 15.

DOE has effectively shuttered its internal office that administers the loan program by placing staff on administrative leave, according to a person familiar with the situation.

‘Distortion of the Process’

Direct final rules are usually reserved for the simplest and least controversial topics, said Ronald Levin, an administrative law professor at Washington University. They’re used to implement the APA’s good cause exception, but DOE cut corners by not including a determination that there was good cause to skip the notice-and-comment process, he said.

Although direct final rules aren’t expected to generate comments, agencies typically revert to the standard notice-and-comment process if they receive critical feedback on them, Levin said.

But DOE took a different approach, one that Levin said he hadn’t seen before. The department said it will respond to “significant adverse comments” it receives by June 16 in a new final rule, or it will withdraw the rule.

“That’s a distortion of the process, even assuming it’s a plausible candidate for a direct final rule,” Levin said. “The other problem is that it isn’t even close to that.”

DOE’s “bold and aggressive” assertion that Students for Fair Admissions applies to the loan program isn’t a sound basis for summarily repealing the rule, he said.

Agency’s Interpretation

The Trump administration has argued for an expansive reading of Students for Fair Admissions as part of its opposition to racial diversity programs. For example, the Education Department has asserted that the ruling prohibits colleges from using racial preferences in any aspect of student, academic, or campus life.

DOE’s analysis of the loan-program rule’s legality under Students for Fair Admissions spans three paragraphs.

“The regulations set out to provide preference to minority business owners, based on the color of their skin,” the department said. “For this reason alone, DOE has determined it must rescind these regulations to be in compliance at least with Supreme Court rulings.”

But the holding in Students for Fair Admissions was narrow because the law differs regarding how race can be used, depending on the context, said Cara McClellan, a University of Pennsylvania law professor and director of the school’s Advocacy for Racial and Civil Justice Clinic.

Courts have accepted the consideration of race in government contracting as a means to remedy racial discrimination, McClellan said. The Supreme Court, however, rejected race-based affirmative action programs that schools tried to justify based on the benefits of diverse student bodies.

“We’re seeing federal agencies saying the law is something different than what the courts have told us, and relying on precedent being something broader and more extreme,” McClellan said. “That’s federal agencies interpreting the law. But that’s what the courts do.”

Deregulatory Tea Leaves

Trump directed agencies to immediately start moving to repeal rules when a 60-day regulatory review period closed April 20, instructing them to prioritize regulations that clash with the 10 Supreme Court rulings.

The Energy Department’s repeal of the loan-program rule is the only public example so far of an agency following Trump’s orders. It doesn’t provide much insight about how broadly and swiftly agencies will try to repeal other rules through Trump’s fast-track plan, said David Super, an administrative law professor at Georgetown University.

Preparing and clearing even simple rulemaking documents is time-consuming for agencies, he said. Many agencies have likely been confused about how they should proceed with Trump’s proposal because most of the Supreme Court cases he listed don’t render any federal rules illegal, Super said.

“Some probably decided that they did not have anything to which this applied; some likely put in requests for clarification that are taking a while to get resolved,” he said. “Energy obviously decided to go full speed ahead, resulting in the rather slapdash document we see here.”