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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 4/29/13

Posted in Agency Authority, Constitutional Issues in Regulations, Judicial Review & Remedies, Regulatory Process

Busy and long today:  The Department of Health and Human Services (HHS) submitted to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), a hospital disproportionate share payment reduction proposed rule.  OIRA may have a new Administrator who may or may not have the opportunity to review the rule – subject to Senate confirmation.  At the other end of the process, the Department of Homeland Security (DHS), Transportation Security Administration (TSA) published a potentially problematic final fee rule and Environmental Protection Agency (EPA) finalized its reconsideration of the electric steam generator final rule.  More regulations headed for the courts are below.

In the courts, the United States Court of Appeals for the District of Columbia Circuit dismissed a challenged to the Securities and Exchange Commission (SEC) mineral extraction rule, but the litigation will go forward in the District Court.  At the United States Supreme Court (SCOTUS), the Solicitor General petitioned for review of the D.C. Circuit’s recess appointments decision, adding to his administrative law docket already occupied by the EPA’s cross-state air pollution rule.

OIRA Nominee:  President Obama (POTUS) nominated Howard Shelanski, the director of the Federal Trade Commission (FTC)’s Bureau of Economics, to be administrator of the OMB Office of Information and Regulatory Affairs on April 25, 2013.  Shelanski, an economist and law professor, once clerked for United States Supreme Court (SCOTUS) Justice Antonin Scalia.

Reaction from participants in the regulatory process followed the expected pattern based on whether the reactor perceived that Shelanski would be more or less attuned to the reactor’s position.  OIRA is currently being run by its Deputy Administrator, a long-time career economist, who will probably be delighted to hand over the reins.  The new Administrator will face the daily fodder of administrative, regulatory, and litigation issues in this blog.

HHS Disproportionate Share:  HHS submitted the Disproportionate Share Hospital Payment Reduction proposed rule to OMB on April 23, 2013.  The proposed rule would establish the statutory aggregate reductions to State Medicaid disproportionate share (or safety net — DSH) hospital allotments from fiscal years 2014 through 2020 under the Patient Protection and Affordable Care Act beginning October 1, 2013.  The annual reduction amounts would be implemented using a methodology determined by the Secretary.  Affordable Care Act requires aggregate reductions to DSH allotments beginning in FY 2014 (October 1, 2013).

The DHS calculus, and many changes in it, has been litigated ad infinitum by hospitals for many years and the planned reductions are likely to exacerbate that litigation.

TSA Fees:  The TSA published a final rule in the Federal Register on April 25, 2013, removing its fees for security review of commercial driver licenses (CDLs) and transportation worker identification credentials (TWICs) from the Code of Federal Regulations.  TSA states that future changes in the fees would be announced only through Federal Register Notices – not subject to advance notice and an opportunity for the public to comment.  TSA thus follows a pattern used by the Department of Justice (DOJ) Federal Bureau of Investigation (FBI) in setting fingerprint check fees only by notice, not rule.

The rule leaves the question of whether directly establishing the content of a fee requirement requires notice and comment rulemaking under the Administrative Procedure Act (APA) – the payment of the exact fee (premised on an activity based costing of the program requirements) is a threshold eligibility standard.  Normally such fee methodology and fees are established by notice and comment rulemaking, and this departure may prompt judicial review.  OMB does not appear to have been reviewed the final rule despite significant legal and policy (including fiscal and budget) issues.

EPA Steam Generator Reconsideration:  EPA finalized reconsideration of certain technical issues under its Coal- and Oil-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units, but left some new source start up and shut down issues unresolved.  Reconsideration is a required step to exhaust the hybrid rulemaking process under the Clean Air Act (CAA).  Litigation challenging the Mercury and Air Toxics National Emission Standards for Hazardous Air Pollutants standards (or MATS NESHAP for those who like to provoke the D.C. Circuit) imposed on electric generating plants can now proceed.

DHS / Labor H-2B:  Also likely is further litigation over the efficacy of the DHS / Department of Labor (DOL) joint final rule attempt to reestablish the unskilled labor visa program, noted previously, that was published in the Federal Register on April 24, 2013.

SCOTUS Petitions:  The Solicitor General (aka the “10th Justice” because of the esteem with which the Office is held) filed the expected petition for certiorari seeking review of the D.C. Circuit decision holding three National Labor Relations Board (NLRB) recess appointments were unconstitutional, now styled as NLRB v. Noel Canning.  This high-risk, unavoidable case may affect one NLRB rule – and many Consumer Financial Protection Bureau (CFPB) rules – and will likely to garner four Justices’ votes to grant the petition.  It would be extraordinary for SCOTUS to hear this case before October.

The Solicitor General last month petitioned SCOTUS to hear and decide EPA v. EME Homer City Generation, L.P., a D.C. Circuit decision vacating the EPA’s cross-state air pollution rule.  Some responses have been filed, but the last response is not due until May 29, so it is possible that the Court will grant the petition this term and set it for argument in the fall.

Extraction Disclosures:  The D.C. Circuit dismissed the petition in American Petroleum Institute v. SEC for want of jurisdiction to initially determine the validity of the SEC’s Dodd-Frank mineral extraction, not the “conflict mineral,” rules.  The mineral extraction rule requires publicly traded companies to disclose payment to a government (foreign or the United States) “made to further the commercial development of oil, natural gas or minerals,” including taxes, royalties, fees, bonuses and “other material benefits.”  API claims the rule violates companies’ First Amendment rights, challenges the SEC’s cost-benefit analysis, and asserts the result will be foreign state-owned companies gaining an advantage because they cannot be covered by the rule.  Petitioners filed in both the D.C. Circuit and district court (American Petroleum Institute v. SEC, D.D.C. No. 1:12-cv-01668) and the case now takes primacy in the district court, which previously stayed proceedings pending the D.C. Circuit’s decision.