Illuminating the Hidden Landscape of Regulation

One might assume the simplest government task is to enforce the law on people who want to follow it—but the reality isn’t that straightforward.

If you’ve spent any time around the oil-and-gas sector, you’ll have heard executives refer to “high compliance” when discussing environmental and workplace-safety rules, meaning they essentially grant regulators everything asked for plus roughly five percent extra, interpreting vague directives with a stricter lens rather than a looser one. You might think that such scrupulousness undermines corporate interests at the regulatory margins, but the opposite tends to be true: work stoppages and entanglements in regulatory muddles typically cost far more than a modest degree of vigilance in following government rules, and—because real life isn’t a dystopian film—oil and gas producers do not actually want to contaminate groundwater or imperil their workers and neighbors.

But how do you achieve high compliance? That question might strike a libertarian as odd, but—really, ask a libertarian.

Wayne Crews, my colleague at the Competitive Enterprise Institute (where I serve as a writer in residence), dedicates his work to cataloging “regulatory dark matter.” Each year Congress enacts a few dozen statutes, the regulatory agencies issue thousands of new rules, and those same agencies produce a substantial amount—though no one can agree on exactly how much—of “sub-regulatory” literature: guidance documents, memoranda, circulars, letters, and the like. These aren’t laws, and they aren’t regulations—and thus they aren’t supposed to be binding. Yet in practice they acquire a quasi-legal heft, with regulators—or prosecutors—referencing guidance documents in enforcement actions to claim noncompliance. Given how sprawling, intricate, and vague federal regulation is, plenty of room exists for ambiguity. For instance, Obama-era clean water rules, now repealed, targeted “navigable waters of the United States,” but the precise meaning was never clear. The Hudson River? Probably. A cow pond in Florida? Maybe.

“Guidance isn’t supposed to be binding,” Crews says. “But the public is afraid to ignore it.” If you want to know what the law requires, you look up the U.S. Code. If you want the exact text of a regulation, you’ll find it in the Federal Register. But regulatory dark matter is … scattered, everywhere and nowhere at once. Crews has long championed the GOOD Act—the Guidance Out of Darkness Act—that would, at a minimum, compel the federal government to create a searchable online portal where businesses and other regulated parties can access the information they need to comply. Crews would push for more than that bare minimum, including assigning identification numbers to these guidance documents (regulations already carry them) so users can tell what the document covers and where its reach lies, which is often not obvious.

“Thirty years ago, you wouldn’t think that a financial regulator would be regulating climate,” Crews notes. “But the SEC does that now. And when you’re looking at green-energy rules, you don’t want to stop at the EPA.”

Keeping up with all of that is labor-intensive and, as a result, costly—especially for small- and medium-sized businesses that don’t have a fleet of lawyers on staff.

“The Federal Register is already a monstrosity, and we regularly hear from small businesses that they can’t keep pace with the flood of rules and regulations pouring out of it like chocolate bunnies,” Crews says. “And that’s just conventional rules. Guidance documents are even more burdensome.”

How challenging is it to stay on top of all that? Crews treats his work as a full-time effort, describing his efforts as “very, very incomprehensive.” The federal government cannot even settle on how many federal agencies exist—depends on who you ask and how you count—so this isn’t simply a matter of drinking from a single firehose. It’s like drinking from an indeterminately large number of firehoses that collectively spew an unknown volume of output.

(So, yeah—we’re overwhelmed.)

Laws are drafted by lawmakers who must face voters at intervals. Regulations go through an iterative process with public commentary. Regulatory dark matter simply arises. There is no democratic accountability and none of the safeguards provided by standard rules-of-law processes—meaning the federal regulatory cycle operates at the margins without stringent regulation. The irony might amuse policy wonks, but it becomes a lot less funny when your business and livelihood are on the line.

“I hate to use the term, but it is one of those good-government, commonsense measures,” Crews says. The GOOD Act, which has cleared the House and is awaiting Senate action, would make it a bit easier to locate relevant documents—or simply learn they exist—but it would not solve the deeper problem, which is that law-by-regulation has given way to regulation-by-guidance.

Most businesses want to play by the rules. It would be nice if there were a reliable way to know what those rules actually are.

World Cup tickets have sparked frustration among soccer fans over pricing, as the tournament kicks off next week with matches across North America. This has prompted investigations by the New York and New Jersey attorney generals into FIFA, the sport’s governing body. In contrast, Redditors have devised a more efficient route. From Wired:

Semafor’s Tim McDonnell explains why crude oil prices haven’t surged much more amid the Iran conflict—sanctions waivers, the region routing oil through pipelines instead of the Strait of Hormuz, China dialing back purchases—and notes that, “The question is how long all these buffers can last relative to the pace of ceasefire talks.”