President Obama continued to reverse his predecessor’s policies this week by undoing a controversial Bush administration rule known as “preemption” that used federal regulations to override state laws on the environment, health, public safety and other issues.

Obama, in a memorandum to federal agency heads issued late Wednesday, said his administration should undertake regulations preempting state laws in rare instances and “only with full consideration of the legitimate prerogatives of the states and with a sufficient legal basis for preemption.”

The president ordered department heads to review all regulations issued in the past 10 years that are designed to preempt state law and determine whether they are justified under the new policy. If they cannot be justified, Obama said, his administration should consider amending the regulations.

Bush administration officials inserted preemptive language into dozens of federal regulations, in many cases shielding corporations from restrictive state laws. For instance, federal preemption provisions stopped California from enforcing a law limiting greenhouse gas emissions.

“It’s environmental law, it’s drug law, it’s mortgage law, it’s a whole host of areas where the Bush administration was really aggressive about using regulatory action to clear state and local laws that businesses and corporations didn’t like,” said Doug Kendall, president of the Constitutional Accountability Center.

The U.S. Chamber of Commerce warned that Obama’s move could wreak havoc on businesses that would have to deal with different state laws, causing a flood of lawsuits.

“Removing federal preemption forces employers to navigate a confusing, often contradictory patchwork quilt of 50 sets of laws and regulations,” said Lisa Rickard, president of the Chamber’s Institute for Legal Reform.

The White House described the move as another step toward rescinding Bush administration policies and protecting the constitutional rights of states.

“This memorandum brings clarity and orderliness back to this rule-making process and also ensures that preemption will be done only in cases where it’s legally justifiable,” said Kenneth Baer, a spokesman for the Office of Management and Budget.

Obama’s memo comes nearly three months after the Supreme Court called into question Bush’s preemption policy while issuing a major setback to pharmaceutical companies. In Wyeth v. Levine, the court ruled 6 to 3 in favor of a woman who had her arm amputated after an improper injection of an anti-nausea medication. The court said drugmakers could not rely on federal regulation to shield them from lawsuits brought under state consumer-protection laws.

The American Association for Justice, which represents trial lawyers, cheered Obama’s move, saying his memo “makes clear that the rule of law will once again prevail over the rule of politics.”

Kendall, of the Constitutional Accountability Center, said that Obama “clearly understands the important role that state and local governments play in our constitutional system and has displayed a very different vision of our Constitution than President Bush displayed in his eight years.”