Header graphic for print
Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

D.C. Circuit Vacates EPA Nonconformance Penalties Interim Final Rule: Violated Administrative Procedure Act

Posted in Judicial Review & Remedies

The United States Court of Appeals for the District of Columbia Circuit today vacated and remanded the Environmental Protection Agency (EPA)’s Nonconformance Penalties for On-Highway Heavy Heavy-Duty Diesel Engines interim final rule (IFR) because EPA failed to satisfy any of the statutory criteria for “good cause” under the Administrative Procedure Act (APA).  Mack Trucks v. EPA.  This short story of best intentions gone bad does not add appreciably to the law except as a warning to agencies that the court watches good cause exceptions carefully and is not shy about its judicial review.

Nonconforming Penalties Rule:  After adopting a standard for diesel engine exhaust gases in 2001, with a nine year implementation cycle (called the 2010 NOx rule), Navistar (formerly International) could not comply, having taken a different technological approach than the rest of the now-compliant heavy truck industry.  EPA recognized that Navistar, a major producer of heavy-duty diesel engines in the United States, would not be able to sell engines in the United States economy in short order because it was running out of compliance options.  EPA, therefore, promulgated an interim final rule – without notice and comment – early this year to permit Navistar to pay non-conforming penalties to continue selling its engines (penalty would add about $2,000) with higher emissions limitations.

Administrative Process and Litigation:  Petitioners – Navistar competitors – requested administrative says of the rule, arguing that EPA did not have “good cause” under the APA for promulgating the without advance notice and an opportunity for the public to comment.  Petitioners also object to the substance of the rule.  EPA denied the requests, petitioners sued, and the court of appeals expedited briefing, argument, and review.

Good Cause:  The merits of whether EPA’s view that it had good cause – i.e. advance notice and an opportunity for comment was “impracticable, unnecessary, or contrary to the public interest” – under the APA warranted no deference by the court.  Rather, the court repeated the oft-intoned warning that the good cause exceptions are “to be narrowly construed and only reluctantly countenanced.”  To each element, the court turned and found none applied:

  • Impracticable – “inevitably fact- or context-dependent” – focuses on the emergency nature of the rule, such as imminent hazards to aircraft, persons, and property, and public safety, whereas this rule rescues a lone manufacturer, even if the economic impacts are significant;
  • Unnecessary – a routine determination, insignificant in nature and impact, and inconsequential to the industry and the public, or ministerial; and
  • Contrary to the Public Interest – that providing advance notice and an opportunity for public comment, which is normally the public interest, would actually harm the public interest.

Short Duration:  The Court found some solace in the fact that EPA, having taken public comments on the interim final rule, was in the process of promulgating a final rule based on those public comments.  While vacature may have limited effect only until a final rule promulgated, the court would not hear of it:

[W]e strongly reject EPA’s claim that the challenged errors are harmless simply because of the pendency of a properly-noticed final rule.  Were that true, agencies would have no use for the APA when promulgating any interim rules.  So long as the agency eventually opened a final rule for comment, every error in every interim rule — no matter how egregious — could be excused as a harmless error.

Pressure to Promulgate a Final Rule:  The decision leaves EPA under pressure, at least from Navistar, to complete the final rule.  EPA deemed the IFR to be non-significant and OMB did not review it.  The final rule becomes significant because of EPA’s loss under the APA’s good cause standard and it should now join more than two dozen rules pending Executive review at the Office of Management and Budget (OMB) for at least a rapid legal and policy review.