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

Monday Morning Regulatory Review – 11/24/14: POTUS Immigration Reform; Obamacare Subsidies Docket Clearing; Conflict Minerals Redux; Drones Predux; Renewable Fuel Standards Exdux; and Unified Agenda

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

President Obama (POTUS) finally moved last week to alter immigration policy by signing an executive order and issuing two memoranda, and amid all the political debate over the action, some legal questions need serious answers.  Also last week, several docket changes helped clear different regulatory issues to be ultimately decided by the United States Supreme Court (SCOTUS), particularly the efficacy of the Internal Revenue Service (IRS) regulations permitting subsidies under the federal health care exchanges when Obamacare (Patient Protection and Affordable Care Act or PPACA) appears to permit subsidies to the insured under State health care exchanges, and the scope of authority to compel disclosure by regulation (i.e. forced speech) under the First Amendment to the United States Constitution.  Although agencies continued to issue proposed and final rules, of interest last week the National Traffic Safety Board (NTSB) bolstered the Federal Aviation Administration (FAA)’s view of its legal authority to regulate “drones” as aircraft.  The Environmental Protection Agency (EPA) admitted that it would further delay the 2014 Renewable Fuel Standards (RFS) and the Office of Management and Budget (OMB) released the Fall 2014 Unified Agenda.

POTUS Immigration Reform:  On Thursday, POTUS issued Creating Welcoming Communities and Fully Integrating Immigrants and Refugees and Modernizing and Streamlining the U.S. Immigrant Visa System for the 21st Century memoranda, gave a speech, and signed a yet to be released Executive Order.  Laura Foote Reiff, at Inside Business Immigration, nicely summarizes the White House’s top line spin on the totality of the executive action.  Expect much threatened litigation over the content of implementation of these directions, but caution that such litigation is complex and fraught with procedural perils.

  The core questions that plague unilateral POTUS actions, however, are not new nor insubstantial:

Authority – Long recognized since Youngstown Sheet & Tube Co. v. Sawyer (aka the Steel Seizure Case), that the President of the United States (POTUS) executive authority under the United States Constitution is a balance between Congress’ authority and extant statutory text:

  1. When the President acts pursuant to an express or implied authorization of Congress, his authority is at its maximum, for it includes all that he possesses in his own right plus all that Congress can delegate.  ….
  2. When the President acts in absence of either a congressional grant or denial of authority, he can only rely upon his own independent powers, but there is a zone of twilight in which he and Congress may have concurrent authority, or in which its distribution is uncertain.  ….
  3. When the President takes measures incompatible with the expressed or implied will of Congress, his power is at its lowest ebb, for then he can rely only upon his own constitutional powers minus any constitutional powers of Congress over the matter.

Thus, the real underlying issue is whether the current Immigration and Nationality Act (INA) and related statutes permit executive agencies under POTUS the flexibility that POTUS asserts.

Standards – Substantial elements of the executive action are poised as regulatory changes, but others draw lines by discretion and the issue unanswered is whether statutory authority exists for such lines and whether arbitrary lines may be drawn by less than regulations.  For example, dividing classes of aliens on the basis of the date upon which they were present in the United States or how they are related to another individual are quintessentially statutory and substantive regulatory decisions.  Unanswered is whether POTUS may direct his subordinates to, and whether his subordinates may, drawn such lines under the extant statutory authority and / or procedural compliance with the Administrative Procedure Act (APA).

Stand by for an extended dance before the courts.

Obamacare Subsidies Docket Clearing:  Challenges to the Obamacare rule permitting individuals enrolled in federal health care exchange insurance plans to receive tax subsidies continue to coalesce.  The United States Court of Appeals for the Tenth Circuit ordered that Oklahoma v. Burwell be stayed pending the SCOTUS resolution of King v. Burwell, similar to a recent order in the D.C. Circuit.  Oklahoma filed a petition for certiorari before judgment with SCOTUS, arguing that granting review now would help SCOTUS bring all of the relevant parties together and suggesting that briefing by tied to the existing schedule in King.

  Certiorari before judgment is something of a long shot even where SCOTUS already is considering the issues presented, but it may be the only way for Oklahoma to get a foot in the door (or at the podium).  Here, Oklahoma seeks permission to argue before SCOTUS, but adds only its status to the case as an employer and a sovereign – the United States has previously advised SCOTUS that it does not challenge King’s standing but does not concede the point.  The petition adds little to the substance of the case and SCOTUS may not act on Oklahoma until King is decided.  The Tenth Circuit’s order may help clear the docket somewhat as a matter of judicial economy, but the petition for certiorari before judgment may be clutter.

Conflict Minerals Redux:  The United States Court of Appeals for the District of Columbia Circuit effectively vacated the panel decision in National Assoc. of Manufacturers v. Securities and Exchange Commission (SEC), vacating the SEC’s Dodd-Frank “conflict mineral” rules, when it granted panel rehearing, and deferred en banc rehearing, on November 18, 2014.  The D.C. Circuit’s brief order granting panel rehearing directed the parties to file supplemental briefs addressing three questions:

  1. What effect, if any, does this court’s ruling in American Meat Institute v. U.S. Department of Agriculture, …, have on the First Amendment issue in this case regarding the conflict mineral disclosure requirement?
  2. What is the meaning of “purely factual and uncontroversial information” as used in Zauderer v. Office of Disciplinary Counsel, …, and American Meat Institute … ?
  3. Is determination of what is “uncontroversial information” a question of fact?

The en banc D.C. Circuit in American Meat Institute upheld the Department of Agriculture (DOA)’s Country of Origin Labeling (COOL) regulations that requires strict labeling of the birth, raising and slaughter of food animals and effectively imposed herd management requirements on mixed cuts (read ‘hamburger’ and ‘sausage’).

  The process is not surprising – a panel is bound by the D.C. Circuit’s en banc decisions and panel rehearing allows the panel to first try to conform the opinions on question 1.  The substantive questions for supplemental briefing – Questions 2 and 3 – set up critical issues of interpretation of SCOTUS precedent, and the scope of review when SCOTUS’s test is applied to federal regulations, where the “facts” are determined by the agency in the administrative record, not by a court.  The circuit court may realize now that whatever the ultimate decision, SCOTUS will need to revisit Zauderer in the formidable federal regulatory context because the use of information gathering and disclosure as a regulatory devise has grown immensely in the succeeding 30 years.

The COOL regulations could reach SCOTUS – the time for filing a petition for certiorari has not yet run, but the questions presented in the panel rehearing order in the conflict minerals case will, in one form or another, ultimately need to be decided by SCOTUS.

Drones Predux:  NTSB has decided with only limited jurisdictional finality, in Huerta v. Pirker, that Pirker’s unmanned aircraft system (UAS) was an “aircraft” for purposes of FAA regulations, which prohibit any person from operating an aircraft in a careless or reckless manner so as to endanger the life or property of another.  The NTSB reversed an Administrative Law Judge (ALJ) decision terminating enforcement proceedings because respondent’s unmanned aircraft (UAS or ‘drone’) was not an “aircraft” for purposes of the regulation.  The FAA’s complaint alleged that respondent operated a Ritewing Zephyr for commercial purposes at altitudes ranging from 10 to 1,500 feet above ground level (AGL for the technically inclined) and in a reckless manner, executing a number of actions that threatened public safety, on the University of Virginia campus.

Pirker remands the complaint to the ALJ for a full factual hearing and may not provide a basis for judicial review, but does support one wing of the fundamental proposition underlying proposed rule pending executive and interagency review at the OMB’s Office of Information and Regulatory Affairs (OIRA), that drones are aircraft and subject to regulation.  The Operation and Certification of Small Unmanned Aircraft Systems (sUAS) proposed rule, submitted for OMB review on October 25, 2014, would seek public comment on possible regulations for the operation of sUAS in the national airspace system, which has historically been defined by regulation with exceptional expansiveness.  The proposed rules would address the classification of sUAS, certification of their pilots and visual observers, registration, approval of operations, and operational limits in order to increase the safety and efficiency of the national airspace system.

  The decision and pending regulations address the classic problem of retrospective review:  a long-standing regulation is overtaken by events – in this case, the development of drones with extended flight profiles that was not possible until miniaturized cell phone technology became available.  The original definition of the navigable airspace dates back to 1958 making the FAA responsible for the control and use of navigable airspace within the United States – from which has grown to become a most complex four dimensional fractal geography.  Although “model” aircraft have by policy been excluded within certain parameters not higher than 400 feet AGL or within three miles of an airport after notifying the airport operator, the reality has outstripped the regulations.  Expect far broader issues to arise in the public comments, ranging from the definition of “commercial,” to the rights and privacy rights of property owners over which drones may or may not fly.

Renewable Fuel Standards Exdux:  The EPA on Friday released a Notice of Delay in Issuing 2014 Standards for the Renewable Fuel Standard Program advising that it was holding off on the final rule for standards that tell refiners how much ethanol and other biofuels must be blended into the nation’s fuel supply.  The notice to be published in the Federal Register admits:

The proposal has generated significant comment and controversy, particularly about how volumes should be set in light of lower gasoline consumption than had been forecast at the time that the Energy Independence and Security Act was enacted, and whether and on what basis the statutory volumes should be waived.  Most notably, commenters expressed concerns regarding the proposal’s ability to ensure continued progress towards achieving the volumes of renewable fuel targeted by the statute.

  Some have speculated that the announcement was related to the nominal terminus for OMB review (the proverbial 90-day clock), but OMB has not (as of writing) taken any action nor as EPA withdrawn the rule and such a reading ascribes far more importance to the “deadline” than Executive Order 12866 grants.  The problems with RFS are manifold and the ability to meet blending requirements depend on so many predictive factors that it may be little more than a guess – yet a very costly guess to industry.

Unified Agenda:  The Office of Management and Budget released the Fall 2014 Regulatory Plan and Unified Agenda of Regulatory and Deregulatory Actions on November 21, 2014.

OIRA’s introduction provides the necessary caveats:

The Agenda and Plan are preliminary statements of regulatory and deregulatory policies and priorities under consideration.  The Agenda and Plan include “active rulemakings” that agencies could possibly conclude over the next year.  As in previous years, however, this list may also include some rules that agencies will not end up issuing in the coming year.

  The reality of the Unified Agenda is quite simple:  it is an agenda – a planning document that changes over time as priorities and realities shift.  Nonetheless, practitioners need to keep an eye on the Unified Agenda for the intelligence that it provides.

  • “signed a yet to be released Executive Order.” I have been looking for this as well, and also been wondering why it was not promptly released.

    • Richard — It remains surprising that the WH does not post the text of Executive Orders the way it posts other actions, such as memoranda. At the same time, you may recall and if my memory serves well, EOs go back to DOJ’s Office of Legal Counsel, who then forwards them to the Federal Register. For a time, we are thus left with speculation as to the details and must consider the public relations put out by the WH (which may be their intent). best, lb

      • Normally a draft EO has passed OLC review before the president signs it. It would be unusual to sign it before OLC review, and in that case OLC ought to put it at the bottom of the queue for review. What’s the point in looking for shoes after the horse is out of the barn?

        • OLC does review and clear before POTUS signs, but the signed EO is returned to OLC for Federal Register submission, and that can take a day or two, and then there is the Federal Register processing time (albeit rapid).