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

Monday Morning Regulatory Review – 1/23/17: Transition Continuity of Operations; Stream Protection Suit 2 & RFS Mandatory Duty Suit

Posted in Judicial Process, Regulatory Process

dawn over the capitol aocThe first Monday and official workday of a new Administration presents a challenge – agencies have been instructed to hold all regulations for the moment pending further review; implementation will take some time.  On the other hand, a suit to enjoin the prior Administration’s stream protection rule and to compel an agency to consult with the States joined prior litigation, and a new challenged an agency failure to fully comply with mandatory duties in promulgating renewable fuel standards.

Transition Continuity of Operations:  The inauguration of the 45th President of the United States and transition from the Obama to Trump Administrations provided no surprises last week – rather a repetition of past transfers of power: continuity and expected, planned change.  The last three business days* of the Obama Administration naturally filled the Federal Register with a bounty of new regulations – from organic poultry and livestock to the multi-agency update of the common rule on protection of human subjects – many of which were not economically significant, or major, or even controversial.  The rush to publish final rules by the past Administration matters less, however, than what happens to that final rule in the current Administration.

* Government employees in the District of Columbia and the “Beltway counties” have Inauguration Day as a “holiday” which means that most offices, including the Office of the Federal Register (OFR) are closed – the rest of the United States Government operated as usual.

Among the first unsurprising actions by the Trump Administration, the White House Chief of Staff sent a memorandum to the agencies instructing them to not send rules to the Federal Register, withdraw any rule already sent to the Federal Register but not yet published, and delay the effective date by 60 days of any rule published that has not taken effect.  The memorandum has no legal effect, but agencies will follow its instructions because it represents their superior political authority.  The memorandum is similar to one sent in the first moments of the Obama Administration (and prior Administrations) and reflects more continuity than change.  Substantial amounts of rulemaking will be subject to this directive and agency reaction will take some time and fill new pages of the Federal Register.

The President of the United States (POTUS) did issue an Executive Order unequivocally stating Administration Policy favoring repeal of the Patient Protection and Affordable Care Act (PPACA or Obamacare), as amended, and instructing the agencies to minimize the regulatory and economic burdens of Obamacare “[t]o the maximum extent permitted by law.”  The Executive Order, like most, is a policy statement and a management directive, not a legal edict, prescription, or proscription because the authority delegated by Congress to implement Obamacare rests in subordinates (i.e. Secretaries) and also cabins their discretion.  The Executive Order is also hardly a surprise.

►  First, note that the documents provided by link are not the official versions, but copies of text that appear to be pasted onto press office stationery.  The White House website may have changed, but the blanks are not yet filled in.  It will take a little time for the White House staff to get up to speed.  Further, while the Executive Order is, itself, a public relations spin that the Administration has engaged on substance (even though it is no more than a management directive with no legal teeth), general-publication editors, and even some trade editors, have inaccurately spun the Executive Order as “giving federal agencies broad powers to unwind regulations” or “allowing federal agencies to disregard provisions of the Affordable Care Act” or would “gut” Obamacare.  Administration or editorial spin has little, and sometimes nothing, to do with legal reality.

Substantively, the memorandum of is greater importance for present purposes because it effects a broad swath of regulatory process, while the Executive Order affects relatively little.  Critical implementation of these instructions depends on agency political appointees’ sagacity where appointments have taken place (not just by and with the advice and consent of the Senate) and career appointees’ good faith management until political appointees take over.  Rather than rehash what has been promulgated, emphasis on what will be approved at what time seems more appropriate.  For any rule that has become effective, the Administrative Procedure Act (APA), at least, requires advance notice of a proposed rule and an opportunity for public comment before promulgating a change through a final rule.  The Federal Regulations Advisor has always taken the view that the Administration must abide by the law and follow the proper procedure in implementing its policy and legal implementation counts, not political spin.  The change in Administration does not change that view at all.  Expect the same critical view tomorrow as provided yesterday.

Also notable, the Department of Justice (DOJ) began to file motions (holiday or not) to delay upcoming court hearings because, as it stated in one motion, “The United States requires additional time to brief the new leadership of [DOJ] on this case and the issues to be addressed at that hearing before making any representations to the Court.”  Some new cases do not require such immediate attention, but are likely to receive such attention anyway.

Stream Protection Suit 2:  The State of Ohio and a dozen other States challenged the Department of the Interior (DOI) Stream Protection Rule, already subject to suit in the United States District Court for the District of Columbia.  The short version of the complaint alleges that DOI’s Office of Surface Mining Reclamation and Enforcement (OSMRE) “fundamentally and impermissibly rewrote” the Surface Mining Control and Reclamation Act (SMCRA) by substituting a mandatory Federal “topdown, one-size-fits all” rule for SMCRA’s recognition of primarily the States’ responsibility in regulating coal mining and reclamation operations based on local conditions and state experience.  The complaint argues that DOI rule exceeded statutory authority delegated in the SMCRA; was arbitrary and capricious under the APA and the SMCRA; and even violated Constitutional State sovereignty.  The States claim that the rule violates also an explanatory statement that is incorporated by reference in the Consolidated Appropriations Act, 2016, requiring renewed consultation with the States – a claim that will deserve close attention as it raises questions of statutory structure.

►  Although the claims are different from those raised in Murray Energy v. DOI, the suit filed immediately on release of the rule (listed by Ohio as a related case, among others), the district court might bring the cases together for management purposes because each will be based on a  single administrative record.  The rule was one that was rushed through to become effective on January 19, 2017, prior to the change in Administration in order to protect it as much as possible.  The rule has become effective, limiting interim relief, but DOJ has yet to appear and assert any position.

RFS Mandatory Duty SuitValero v. McCarthy, a new suit in the United States District Court for the Northern District of Texas, seeks an order to compel the Environmental Protection Agency (EPA) to adjust the renewable fuel standard (RFS) annually as a nondiscretionary duty.  EPA has done so to an extent in the past, but Valero seeks to compel a more nuanced set of regulations that reflect statutorily mandated findings, such as actual fuel availability.  At bottom, Valero alleges that EPA has imposed mandatory mix amounts of renewable fuel, advanced biofuel, biomass-based diesel, and cellulosic biofuel that were not attainable and thereby created penalties for refiners and importers, but not blenders, as the obligated or regulated parties.  Valero petitioned EPA in June 2016 to complete a rulemaking on the substance of the point of origin of renewable fuels, and thus its obligations, but EPA proposed to deny the petition last November, but did not recognize the regulation as a nondiscretionary duty.

►  Plaintiffs distinguish between a mandatory duty to annually set the amounts and the obligated parties from the “appropriateness” of the amounts and any reconsideration of the obligated parties.  In reality, Valero is using a tactic that environmental advocates have used in the past to force EPA to take some action under pressure to take an action plaintiffs’ favor (in this case, finding someone else is obligated to provide the required amount of renewables).  The suit itself may be difficult to sustain, but it presents a challenge for defending counsel at DOJ.