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

Monday Morning Regulatory Review – 2/20/17: Delay Challenge; Withdrawal Challenge; First Disapprovals Complete with More to Come & Stability Struggles in a New Regulatory Docket

Posted in Agency Authority, Judicial Review & Remedies, Regulatory Process

dawn over the capitol aocTwo cases that challenge the effect of a new Administration’s moratorium on rules pending review by new appointees deserve some attention this week – one challenges a delay of effective date while the other challenges a withdrawal from public inspection prior to publication.  The march of regulatory  disapprovals continued to build with the first two completions and many more clearing one or the second House of Congress.  The regulatory machine itself is also showing signs of life as an agency seeks to provide some stability amid growing concern about the repeal of the underlying statute.

Delay Challenge:  The Natural Resources Defense Council sued the Department of the Interior (DOI) and its Fish and Wildlife Service (FWS) last week claiming that DOI violated the Administrative Procedure Act (APA) by delaying the effective date of the January 11, 2017, Endangered and Threatened Wildlife and Plants; Endangered Species Status for Rusty Patched Bumble Bee final rule, called a “Listing Rule” in the vernacular of the Endangered Species Act (ESA).  The final rule preamble, under the “Dates” heading, instructed the Office of the Federal Register (OFR) to insert a date 30 days after publication, consistent with the APA minimum 30-day delayed effective dater requirement, which the OFR calculated would make the rule become effective February 10, 2017.  The regulatory text is silent on the effective or compliance date.  On February 10, 2017, FWS published a “final rule” stating in the Dates portion of the preamble: “The effective date of the rule that published on January 11, 2017, …, is delayed from February 10, 2017, to March 21, 2017.”

FWS probably invited this litigation in characterizing its action:

To the extent that 5 U.S.C. 553 applies to this action, it is exempt from notice and comment because it constitutes a rule of procedure under 5 U.S.C. 553(b)(A).  Alternatively, our implementation of this action without opportunity for public comment, effective immediately upon publication in the Federal Register, is based on the good cause exceptions in 5 U.S.C. 553(b)(B) and 553(d)(3).  Pursuant to 5 U.S.C. 553(b)(B), we have determined that good cause exists to forgo the requirement to provide prior notice and an opportunity for public comment thereon for this rule as such procedures would be impracticable, unnecessary, and contrary to the public interest.  We are temporarily postponing for 60 days after January 20, 2017, the effective date of this regulation pursuant to the previously noted memorandum from the White House.  As a result, seeking public comment on this delay is unnecessary and contrary to the public interest.  For these same reasons, we find good cause to waive the 30-day delay in effective date provided for in 5 U.S.C. 553(d).

NRDC seeks vacatur of the “delay rule” under the APA’s requirement that a court set aside or vacate unlawful agency action.

►  Although the “final rule” is so categorized, it is only a temporary postponement of an instructional effective date, not a change in any regulatory text.  FWS’s authority to postpone a rule effective date (like other agencies) does not implicate the advance notice and an opportunity for public comment requirements of the APA – it has no substantive effect other than the delay.  If the effective date or compliance date had been included in the regulatory text amended by the final rule (i.e. the text to be published as sections of the Code of Federal Regulations), then the agency would need to amend the text of the rule through the normal amendatory process.   The complaint does not suggest another statute limits the agency, so the issue of agency delays of an effective date may be cleanly presented.

Withdrawal Challenge:  Additionally, NRDC challenged the Environmental Protection Agency (EPA) withdrawal of the Effluent Limitations Guidelines and Standards for the Dental Category final rule, one among many, after filing for public inspection but before publication in the Federal Register.

The salient facts are simple:  The EPA Administrator signed the final rule on December 15, 2016, and the agency delivered the final rule to the OFR for publication in the Federal Register.  The OFR posted the final rule for public inspection on Thursday, January 19, 2017, and scheduled the final rule for publication in the Federal Register of Tuesday, January 24.  On Monday, January 23, after the White House Chief of Staff (COS) memo, EPA asked the OFR to withdraw the rule from publication, and the OFR did so.  Although not published and withdrawn from public inspection, EPA maintains a pre-publication public typescript copy.

In short, the suit challenges the withdrawal of a rule after that rule has been filed for public inspection, rather than publication.  The suit asserts that the combination of provisions of the APA, Freedom of Information Act (FOIA), and the Federal Register Act compel the result that a rule cannot be withdrawn after the OFR posts it for public inspection.

►  The suit seeks a declaration that withdrawal was improper and vacatur of that withdrawal.  Interesting demand – but then what happens?  The suit does not seek to compel (at least yet) publication in the Federal Register and it is publication in the Federal Register that creates constructive notice of the content.  Nor does the suit name the OFR as a defendant.  The issue, of course, goes much further than just this agency and this rule because a number of rules are withdrawn with each change of Administration to a different political party.

Both cases present issues that are difficult to consider novel given the APA’s 71 year history, but the answers are not so clear.  Stay tuned.

First Disapprovals Complete with More to Come:  The President of the United States (POTUS) signed:

  • H.J. Res. 41 Public Law 115 – 4, last Tuesday, disapproving the Securities and Exchange Commission (SEC)’s Disclosure of Payments by Resource Extraction Issuers final rule, and
  • H.J. Res. 38, Public Law 115 – 5, last Thursday, disapproving the DOI Stream Protection Rule.

The agencies now must take the nondiscretionary steps necessary to remove the regulatory text and revert to prior text.

The Senate last Wednesday agreed to H.J. Res. 40, disapproving the Social Security Administration (SSA) relating to Implementation of the NICS Improvement Amendments Act of 2007, clearing that measure for submission to POTUS.  On the other side of the Hill, the House of Representatives approved more resolutions of disapproval under the Congressional Review Act (CRA), including H.J. Res. 42, to disapprove and vitiate the Department of Labor (DOL) final rule relating to drug testing of unemployment compensation applicants, and H.J. Res. 43, to disapprove and vitiate a Department of Health and Human Services (HHS) final rule relating to compliance with HHS ‘s then-interpretation of the title X of the Civil Rights Act requirements by project recipients in selecting subrecipients,  The House has passed more such joint resolutions on less significant issues.

►  The numerosity of CRA joint resolutions of disapproval now deprives them of newsworthiness – Congress is simply dismantling regulations that still fall within the scope of the CRA special procedural rules for joint resolutions.  The scope is declining and may soon end for the Congress, POTUS, and the agencies.  Whether judicial challenges can be mustered against the CRA’s bar to judicial review of most of the CRA processes (and perhaps the joint resolution result) has yet to be seen.

Stability Struggles in a New Regulatory Docket:  The new Administration has put the regulatory machine into first gear with HHS’s Centers for Medicare and Medicaid Services (CMS) publication of the Patient Protection and Affordable Care Act; Market Stabilization proposed rule.  The individual and small group health insurance markets and exchanges under the Patient Protection and Affordable Care Act (PPACA or Obamacare) have suffered from instability due to insurer withdrawals and increasing insurance rates and defaults that the proposed rule seeks to address with increased flexibility in regulatory requirements.  The proposed rule requests comments by March 7, 2017 – a mere 20 days after publication.

►  The APA does not specify a minimum public comment period, but 20 days seems awfully short, though perhaps required by the exigencies of the subject matter.  The proposed rule comes in the midst of possible repeal or wholesale change of Obamacare and seems to admit that the insurance markets could enter a death spiral without some, at least temporary, changes within the system.  Even as the Administration considers a systematic retrenchment, chaos is not in its interest.  The proposed rule appears to be the first substantive foray into rulemaking by the new docket management.  Numerous routine matters have been published, but this rule contains high policy jingo.  The regulatory machine must grind on as long as statutes demand, and until the statute’s demand is met or the statute is no more.