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Letters to a Senator: 8th Cir. says EPA violated APA Requirements

Posted in Judicial Review & Remedies, Regulatory Process

Occasionally, an opinion begs to be quoted, and so no further introduction is needed to the United States Court of Appeals for the Eighth Circuit’s March 25, 2013, opinion in Iowa League of Cities v. EPA:

The Iowa League of Cities (“League”) seeks direct appellate review of two letters sent by the Environmental Protection Agency (“EPA”) to Senator Charles Grassley.  The League argues that these letters effectively set forth new regulatory requirements with respect to water treatment processes at municipally owned sewer systems.  According to the League, the EPA not only lacks the statutory authority to impose these regulations, but it violated the Administrative Procedure[] Act (“APA”), 5 U.S.C. § 500 et seq., by implementing them without first proceeding through the notice and comment procedures for agency rulemaking.  We find that we have subject matter jurisdiction over the claims, and we vacate under [5 U.S.C. §] 706(2)(C), (D).

Congressional Relations:  The League perceived a conflict between EPA’s official written policies and the expectations that EPA was transmitting to municipal wastewater treatment facilities.  They sought help from Senator Grassley in the normal course of congressional relations.  The Senator obliged and apparently passed their concerns to EPA.  EPA responded to Senator Grassley in letters in June and September 2011.  Do these letters create regulations?  In this case, the Eighth Circuit found that they did.

Background:  Iowa League of Cities involves the complex scheme under the Clean Water Act, EPA’s implementing regulations, State permitting, EPA’s manual, and two letters.  To vastly oversimplify and with apologies to lawyers who practice water pollution law on a daily basis, the decision focuses on two critical questions of how municipal waste water treatment is regulated:

  1. Whether, at the “end of pipe” where the finished water rejoins a natural body of water, the quality and quantity of effluents may be diluted in a “mixing zone” and whether that zone may ever affect a recreational area of the waterway.
  2. Whether a sewage system may use a mechanical additive  to ‘clump’ effluents and cause them to drop out of the discharge stream faster rather than a biological means in secondary sewage processing during high natural flows and then “blend” that effluent with other biologically treated secondary streams to discharge the whole without triggering a “bypass” rule violation.

Again to oversimplify, the mix of federal and state authority makes these questions somewhat murky and if any of these questions was answered in the negative, a violation would occur.  You can learn far more than you would ever wish to know about public sewage treatment and EPA’s regulation and management of sewage treatment in the court’s 42-page opinion.

Joining Issue:  Can Congressional relations create regulations?  EPA believed the responses were guidance letters that merely discuss existing regulatory requirements.  The League argued that the letters contradicted both the Clean Water Act (“CWA”) and the EPA’s lawfully promulgated regulations.  The League’s procedural claim was that the letters announced new legislative rules modifying the EPA’s existing legislative rules.  The EPA admitted it did not engage in APA notice and comment procedures, but it insists there has been no procedural impropriety because the letters should be considered general policy statements or, at most, interpretative rules that do not require notice and comment rulemaking.

The Letters:  In the first letter to Senator Grassley, EPA reviewed the various regulations and guidance. But as the court of appeals found:

The June 2011 letter tells state permitting authorities that mixing zones in primary contact recreation areas are necessarily inconsistent with achieving the water quality levels required by federal regulations.  The EPA eviscerates state discretion to incorporate mixing zones into their water quality standards with respect to this type of body of water.  In effect, the EPA has created a new effluent limitation: state permitting authorities no longer have discretion to craft policies regarding bacteria mixing zones in primary contact recreation areas.  Instead, such mixing zones are governed by an effluent limitation that categorically forbids them.  To be sure, in 1994 the EPA stated that as its “understanding of pollutant impacts on ecological systems evolves, cases could be identified where no mixing zone is appropriate.”  ….  It seems that the EPA’s understanding of pollutant impacts has so evolved, and it has now identified an entire class of cases “where no mixing zone is appropriate.”  However, the effect of the EPA applying its more developed understanding of pollutant impacts is to promulgate a new effluent limitation that state permitting authorities must follow.

The second letter, moreover, answered the substantive question of “blending” mechanical and biological secondary treatment streams with a distinct “no.”  The court found that if a system uses a secondary treatment process that routes a portion of the sewage flow through a non-biological technology disfavored by the EPA, then EPA will view it as a prohibited bypass, regardless of whether the end of pipe output ultimately meets the secondary treatment regulations.  A hard up or down (in this case down) answer is a legislative rule.

Thus, the EPA, according to the court, created new legislative rules without following the notice and comment procedures of the APA.  This procedural violation required the court to vacate this new rule because it was “without observance of procedure required by law” under the APA.  The rule, however, was not obviously precluded by the CWA, so the court declined to address the merits of whether the EPA’s legislative rules reflect an arbitrary and capricious interpretation of the CWA.  EPA is free to proceed by notice and comment rulemaking if it chooses.

The Conundrum:  The line between a “legislative” rule and an “interpretive” rule is often very fact driven, and difficult to discern at best, and the United States Court of Appeals for the District of Columbia has opined on the issue many times.  The Eighth Circuit joined the ranks of numerous prior decisions explaining how difficult it may be to find that line:

Identifying where a contested rule lies on the sometimes murky spectrum between legislative rules and interpretative rules can be a difficult task, but it is not just an exercise in hair-splitting formalism.  As agencies expand on the often broad language of their enabling statutes by issuing layer upon layer of guidance documents and interpretive memoranda, formerly flexible strata may ossify into rule-like rigidity.  An agency potentially can avoid judicial review through the tyranny of small decisions.  Notice and comment procedures secure the values of government transparency and public participation, compelling us to agree with the suggestion that “[t]he APA’s notice and comment exemptions must be narrowly construed.”

Tests and Coordination:  “Murky” may be an understatement as there are at least three applicable tests. One considers the effects of an agency’s action, inquiring whether the agency has (1) imposed any rights and obligations, or (2) left the agency and its decisionmakers free to exercise discretion.  The agency’s language is an important consideration in drawing that line.  A second test looks to the agency’s expressed intentions and considers three factors: (1) the agency’s own characterization of the action; (2) whether the action was formally published, i.e. in the Federal Register and the Code of Federal Regulations; and (3) whether the action has binding effects on private parties or on the agency.  A third test looks to the authority exercised:  is the expression coming from the official’s regulatory authority?

Agencies and litigators face the issue of whether a pronouncement is a legislative rule and interpretive rule daily and often struggle drawing the line because it involves both the substance of the statutes and regulations and the underlying APA requirements and interpretations.  The solution may only become clear through a negotiation between two specialists – one from each craft.

Rarely does this issue reach such an attenuated point of appearing in an agency response to a Senator or Member of Congress – indeed, this may be a first.