On May 4, Rep. Shelby Labs (R-Bucks) introduced House Bill 2385 establishing a broad, new Regulatory Sandbox Program that allows state agency heads and individual permit applicants to permanently waive and replace any requirement in regulation for any permit to provide “relief from needlessly cumbersome regulations.”

The Regulatory Sandbox concept was first developed in the United Kingdom and has been adopted by several states to provide financial institutions and insurance companies a way to temporarily test new financial products on limited numbers of customers without having to fit into the existing regulatory framework.  Read more here.

The idea behind Sandbox is to lower the cost of financial services and insurance companies competing in national and world markets.  Read more here.

House Bill 2385, however, is much, much broader. 

It applies the concept to all state agencies and all their permits and authorizations covering any industry, individual or local government they regulate allowing them to permanently waive any regulation and adopt replacement requirements with minimal public review.

The bill includes two processes for approving “sandbox permits” that waive and/or replace regulatory requirements-- one for agencies to go through and one for individual permit applicants to request.

Agency “Sandbox Permits”

The bill establishes the program under the Independent Regulatory Review Commission and directs all state agencies to review all the permits and authorizations they issue to determine if they should participate in the “Sandbox” program.

The proposal agencies submit to the IRRC would establish “Regulatory Sandbox Permits” for one or more authorizations that would replace, modify, supplement or amend any requirement now on the books.

It would also include a list of regulations waived for each authorization and “alternate protective measures” intended to replace those regulations.

The IRRC would then open a public comment period on the proposal and review the application and determine if it is in the public interest under its existing Regulatory Review Act Authority..

Once approved, the agency can then issue a “regulatory sandbox permit” to applicants for those permits and authorizations in their plan.

Individual Permit Applicants

There is a second procedure in the bill that allows any regulated person to submit an application for a “regulatory sandbox permit” to an agency specifying what regulations they propose to be exempt from, the benefits to the Commonwealth and the public and any alternative protective measures they would propose in place of the waived regulations.

The agency then reviews the application and makes a decision to approve or disapprove the “sandbox permit” for that individual company/applicant.

The agency is required to still follow any public review requirements covering the individual permit for which the “sandbox permit” application is being submitted.

It isn’t exactly clear whether the individual applications for a “sandbox permit” can be for any permit or just the ones each agency submitted to the IRRC.

Some Thoughts

What the language in House Bill 2358 does is put the authority to permanently waive any regulation and adopt new, replacement requirements for any state permit in the hands of one person-- the state agency head-- with minimal public review.

None of the public review requirements or the checks and balances of the state Regulatory Review Act, the Commonwealth Documents Law and the Commonwealth Attorneys Act would apply to the permanent waving or replacement of any regulation under this bill.  Read more here.

For permit applicants, this process creates massive uncertainty in what the requirements are for getting any permit, because they could be changed in a matter of weeks, not just for one permit type, but for one permit applicant at a time.

For agencies like DEP that depend on federal programs for funding, those programs are based on having an approved set of regulations and requirements that meet federal law.  Being able to unilaterally and permanently waive and replace any regulation that is part of that program clearly risks federal funding.

Being able to waive any regulation for a class of permits or for individual applicants would create massive uncertainty and lack of uniformity in setting and applying permit requirements.

Eliminating the multiple opportunities for public review in adopting regulation changes will lead to significant public concerns.

For the public review that is left, it fundamentally changes the review itself from how is an applicant meeting the regulatory requirements to something completely different-- evaluating what regulations were waived, how any replacement requirements would protect health and the environment and then is an applicant meeting what’s left of regulations that still apply.

As noted, the original “Regulatory Sandbox” concept applied temporary measures to financial and insurance institutions to test new products.  So do the state laws adopted on the U.K. model.

Applying the ability to permanently waive and replace regulations to programs, like in DEP, that are geared to protecting public health and the environment simply doesn’t translate.  It’s not like switching banks.

This bill is another bill among many by Senate and House Republicans passed to do things like kill regulations by doing nothing, shielding law violators, not telling the public why regulation changes are being made and more. (See Related Articles.)

If the objective of House Bill 2358 is to be able to permanently eliminate and replace any regulation on the books with minimal public review and invest that power in one person, it certainly achieves that goal and more.

The bill was referred to the House State Government Committee for consideration.

Related Articles:

-- House OKs 4 Bills On Killing Regulations By Doing Nothing; Shielding Law Violators; Mandating Private Review Of DEP Permit Applications

-- Senate Republicans Pass Bills To Kill Regulations By Doing Nothing, Require Private Review Of Permits, Not Tell Public Why Regulations Changes Being Proposed

[Posted: May 4, 2022]

5/9/2022