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

Monday Morning Regulatory Review – 4/3/17: Social Cost of Carbon Withdrawal; Congressional Review Act Terminus & Speed Rulemaking Delay

Posted in Constitutional Issues in Regulations, Executive - OMB Review, Regulatory Flexibility & Small Business, Regulatory Process

dawn over the capitol aocIn another Executive Order, the President of the United States (POTUS) directed subordinates to reconsider certain rules, but this time included a process change that has more subtle process implications.  The “deadline” for filing joint resolutions to set aside regulations from a prior Administration appears to have passed, but that may mean very little.  And as expected, an agency sent a speed rule to delay application dates of a prior regulation for review, perhaps setting a pattern, but perhaps not.

Social Cost of Carbon Withdrawal:  POTUS signed Executive Order 13783, Promoting Energy Independence and Economic Growth, on March 28, and the subordinate agencies began implementation that very day.  The Executive Order directed the Environmental Protection Agency (EPA) and Department of the Interior (DOI) specifically to “immediately take all steps necessary to review” specified final rules “and, if appropriate, shall, as soon as practicable, suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules.”  Moreover, the Executive Order provides for the agencies to notify the Attorney General of their actions so that he may advise courts appropriately – a logical step given that many (if not all) of the specified final rules are subject to judicial review.  In turn, the agencies have noticed review of the final rules, and the Department of Justice (DOJ) has sought to hold litigation in abeyance.  Several courts have de-scheduled impending oral argument.

►  All that is not particularly unusual and will work through to judicial decisions that may be worthy of comment.  This Executive Order makes one more critical change.

The Executive Order also directs the withdrawal of six technical documents that set out the analytical framework for considering the Social Cost of Carbon (SCC) in decisions about regulations and other actions.  In short (and to vastly oversimplify), the six technical documents, issued by the last Administration over the course of six years, detailed how agencies should calculate the benefits from reducing free carbon emissions and utilize that information in benefit / cost analyses under Executive Order 12866, the Regulatory Flexibility Act (RFA), and other analytical regimes.  The Executive Order thus eliminates agency calculus of SCC in their benefit / cost analyses.  The Executive Order then instructs agencies to utilize previously established principles of economic analysis:

Effective immediately, when monetizing the value of changes in greenhouse gas emissions resulting from regulations, including with respect to the consideration of domestic versus international impacts and the consideration of appropriate discount rates, agencies shall ensure, to the extent permitted by law, that any such estimates are consistent with the guidance contained in [Office of Management and Budget (OMB)] Circular A-4 of September 17, 2003 (Regulatory Analysis), which was issued after peer review and public comment and has been widely accepted for more than a decade as embodying the best practices for conducting regulatory cost-benefit analysis.

Executive Order 13783 reads like the technical instruction that it purports to be, but only the SCC provisions have permanent qualities of an Executive Order; the rest amount to one-time directives, or memoranda.  Executive Orders and directives have the same legal effect (derived from the statutes or Constitutional provisions authorizing them, and often little more than being from a superior) and remain in effect beyond inauguration of a new Administration, but Executive Orders are officially serialized and codified, memoranda not.

►  SCC is a form of rhetoric – argument – as is economic analysis generally.  Removing the technical support documents as federal policy and reverting to the 2003 OMB Circular A-4 instructions without SCC does not end the SCC issue.  Any commenter on a proposed rule may raise the social cost of carbon and assert the applicability of a $/ton value in the technical documents – the instructions of the Executive Order merely remove the process from the proposed rule development by the agencies.  The burden of proceeding and of persuasion changes and now falls upon the commenter to argue and justify SCC values and applications to a proposed rule as argument to promulgate a different final rule.  Commenters must do more than simply argue that the agency should consider SCC:  commenters will need to affirmatively show the SCC values for the agency to consider.  In short, the initial research burden will now lie with the commenter and the commenter must provide the facts and argument sufficient to warrant response to a substantive comment.  In a final rule preamble, an agency must respond to the substance of comments, not do research suggested by a comment.  State Farm’s familiar principles of judicial review under the Administrative Procedure Act (APA) apply:

[T]he agency must examine the relevant data and articulate a satisfactory explanation for its action including a “rational connection between the facts found and the choice made.”  ….  In reviewing that explanation, [courts] must “consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.”  ….  Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

SCC is not gone – it’s shifted to a different shape.

Congressional Review Act Terminus:  The President of the United States (POTUS) signed into law at least five more Congressional Review Act (CRA) joint resolutions of disapproval last week, vitiating regulations promulgated by the prior Administration, and the House of Representatives and Senate continued to consider resolutions.  The newsworthy event here is the passage of the “deadline” for filing of a joint resolution of disapproval – according to the Senate Republican Policy Committee – on March 30, 2017.  Calculating other provisions of the CRA calendar leads to the suggestion that resolutions must be voted upon by approximately May 9 – approximately because counting is based on legislative days, not calendar days.

►  So be the political leadership’s view, but the deadline really means little.  The CRA provisions expediting scheduling of joint resolutions of disapproval are statutized rules of the Senate and the House.  The Constitution of the United States (Art I, § 5, cl, 2) provides, however, that “Each House may determine the Rules of its Proceedings”.  Statutizing those rules would not derogate that constitutional authority.  If the House and Senate wish, and the POTUS signs, any joint resolution or Act can vitiate a Congressionally delegated agency rule, the courts will not look behind the enrolled enactment to determine whether it was validly enacted (to say nothing of the CRA’s bar to judicial review).  Thus, these dates mean what Congress wishes them to mean.  In reality, Congress may act at any time to alter underlying legislative delegations to vitiate any rule – the CRA is just a fast track procedure and a joint resolution is just another Act.

Speed Rulemaking Delay:  The Department of Labor (DOL) Employee Benefit Security Administration submitted its Definition of the Term “Fiduciary” – Delay of Applicability Date to OMB for executive and interagency review last Tuesday.  The rule’s uniqueness may lie in the notion that it is considered economically significant, not that it is a rapidly processed rule with a very short period of public comment.  DOL split the comments on the March 2, 2017, proposed rule:  public comments on the proposal to extend the final rule applicability dates for 60 days were due March 17, 2017, while public comments regarding the substantive review of the final rule are not due until April 17, 2017.

►  The Fiduciary Rule’s implementation date is fast approaching, and OMB has little on its docket at present, so one may expect review to be completed soon.  The Fiduciary Rule illustrates part of a pattern of regulations to implement delays and reviews, but only because the regulatory process is made more public and transparent by the designation as economically significant, leading to OMB’s review and docketing.  Other agencies and rules have tread this road before, just with less scrutiny.