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

Monday Morning Regulatory Review – 12/14/15: Water, Jurisdiction, Finality; Mineral Extraction Payments; Hours of Service Reporting; & Renewable Fuel Standards

Posted in Judicial Process, Judicial Review & Remedies, Regulatory Flexibility & Small Business

dawn over the capitol aocThe United States Supreme Court (SCOTUS) returned to one of the thorniest of briar patches of statutory imprecision and jurisdictional delegation, the Clean Water Act (CWA). Another regulatory issue likely to eventually reach SCOTUS revolves on the scope of First Amendment rights and forced corporate speech, currently joined in one agency’s proposed rule. Two other agencies moved forward with finals rules in light of prior litigation, one certain to generate new litigation and the other raising old concerns about efficacy, not legality.

Water, Jurisdiction, Finality: In an unsurprising order, SCOTUS granted the Solicitor General’s petition for certiorari in Army Corps of Engineers v. Hawkes Co., Inc. (U.S. No. 15-290) on Friday, setting the stage for a determination of whether a CWA jurisdictional decision constitutes a final agency action under the Administrative Procedure Act (APA). The Solicitor General asked:

Whether the United States Army Corps of Engineers’ determination that the property at issue contains “waters of the United States” [WOTUS] protected by the [CWA] …, constitutes “final agency action for which there is no other adequate remedy in a court,” …, and is therefore subject to judicial review under the [APA] ….

Respondent agreed that SCOTUS should grant certiorari and framed the question to add the notion that the “Jurisdictional Determination” is “conclusive as to federal jurisdiction” under the CWA.

Underlying these variants on the question is the decision by the United States Court of Appeals for the Eighth Circuit holding that such a CWA jurisdictional determination is reviewable “final agency action” under the APA, in conflict with decisions of other Courts of Appeal. Respondent claims that the Engineers’ jurisdiction determination imposes a trilemma: expend substantial time and funds to apply for a permit for planned actions (in this case, $270,000 over years), proceed without a permit and risk possible fines of $37,500 per day, or abandon planned actions.

In 2012, SCOTUS held, unanimously, in Sackett v. EPA, that a property owner could seek judicial review when the Environmental Protection Agency (EPA) ordered the Sacketts to stop home construction because EPA decided that their land included a protected wetland subject to CWA under a pre-revision WOTUS definition, and, therefore, required a permit. Hawkes presents a permitting precursor to that issue. Although the issue arises in adjudication finality, those adjudications are the application of the EPA and Engineers current jurisdictional regulations on, and recent redefined, “waters of the United States” which is itself subject to consolidated petitions for review with a Sixth Circuit nationwide stay, and multiple district court complaints. In that rulemaking preamble, the agencies noted that they have made more than 400,000 jurisdictional determinations since 2008, and of those, more than 120,000 were based on case-specific “significant nexus” interpretation of a prior SCOTUS decision.

► The issue in Hawkes is relatively “clean,” but a closer examination illustrates how complicated the issue becomes. If finality is premised on the conclusion of agency action to impose a direct cost, compel compliance, or bar activity, then the number of potential final agency actions is more than substantial – it could be gargantuan. If, on the other hand, this agency determination of jurisdiction is not final, then many unwittingly may be drawn into the permit or fine or stop trilemma by the “floating” nature of the definition of “waters of the United States.” A question that may be the focus of Brandies-ian briefing would be the point at which the cost of compliance with a jurisdiction assertion consumes a sufficient portion of the value of the subject matter as to become either a final agency action or a Fifth Amendment taking requiring just compensation. SCOTUS will hand down some decision on finality by the end of next June.

Mineral Extraction Payments: The Securities and Exchange Commission (SEC) on Friday voted to propose a rule to require oil, gas, and mineral extractors to disclose payments made to foreign governments. The SEC originally adopted a mineral extraction reporting rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2012, but the United States District Court for the District of Columbia vacated that rule in American Petroleum Institute v. SEC.  The court found that the SEC erred in at least two respects: (1) that Dodd-Frank required the public disclosure of the issuers’ payment information, and (2) the SEC’s denial of any exemption from disclosure for instances where a country prohibits payment disclosure was arbitrary and capricious.

Little more than a year later, an intervenor in that litigation, Oxfam, sued the SEC District Court for the District of Massachusetts to compel the SEC to promulgate a final rule implementing the Dodd-Frank requirement. That court held that the SEC unlawfully withheld agency action by not promulgating a final rule and reset of the Dodd-Frank clock that required the SEC to promulgate a final rule within a fixed time. The proposed rule responds to that requirement.

Initial comments will be due on January 25, 2016, and response comments will be due on February 16, 2016. Neither deadline depends on when the Federal Register publishes the rule.

► The SEC appears to be sticking to its previous conclusions while providing different rationales – requiring public disclosure as a matter of its discretion and providing for case-by-case applications for exemptions. The SEC’s response may meet the minimal requirements of the various district court orders, but expect new (and old) issues to be raised in additional litigation – including the issues left undecided, such as rights under the First Amendment to the United States Constitution and compelled speech that doomed the SEC’s conflict minerals rule and underlying statute. Expect all of those issues to pervade the future public comments, and, therefore, the SEC’s analysis in any final rule.

Hours of Service Reporting: The Department of Transportation (DOT)’s Federal Motor Carrier Safety Administration (FMCSA) released Electronic Logging Devices and Hours of Service Supporting Documents final rule on Thursday. The rule establishes minimum performance and design standards for hours-of-service (HOS) electronic logging devices (ELDs); requirements for the mandatory use of these devices by drivers currently required to keep those records; requirements concerning HOS supporting documents; and measures to address concerns about harassment resulting from the mandatory use of ELDs. This final rule is just the latest in the long running regulatory dispute between carriers, drivers, and the agency on a host of issues, including the 2011 vacatur of previous hours of service rules.

FMCSA regulated carriers are not very diverse – 99% are considered small entities under the Small Business Administration (SBA) definitions under the Regulatory Flexibility Act (RFA). More so because of this fact, the costs and benefits of this rule are striking. FMCSA estimates more than $1 Billion in costs for new electronic devices and upgrades and $790 million in costs for extra drivers to conform to hours of service limits, against $1.9 Billion in driver paperwork time saved, $434 million in office staff time saved, and a theoretical $572 million in accident avoidance, but only $127 million in direct cost savings. FMCSA opines that providing any exemption, or apparently relief, to small business would be infeasible.

The HOS rules publish in the Federal Register on December 16.

► Recognize that the FMCSA faces difficult choices whenever approaching the regulation of motor carriers because that 99% are small entities (and most within that figure are single owner-operators). Nonetheless, FMCSA does not appear to recognize the difference between out-of-pocket expenses (for electronic devices, etc.) and out-of-time expenses (filling out paperwork) – and the critical problem that small business have little of the former and potentially more of the latter. The issue is not just numbers – the issue is qualitative common sense. Unfortunately, litigation is, again, all too likely.

Renewable Fuel Standards: Today, the EPA publishes the latest installment of the renewable fuel standard (RFS) debate and makes no one happy. As EPA points out, the fundamental objective of the RFS provisions under the Clean Air Act (CAA) was to increase the use of renewable fuels in the transportation system every year through at least 2022 in order to reduce greenhouse gases (GHGs) and increase energy security. Although the final rule responds to a consent decree on timing, EPA faces the basic problem of accounting for the real-world challenges that have rendered many of the RFS goals unachieved (and perhaps unachievable). Volume targets established by Congress for 2014, 2015, and 2016 were simply beyond reach.

► Putting aside the soap operatic commercials decrying the standard and decrying the decriers, the RFS standard fails because it amounts to a “five year plan.” While the goal may be noble, the means have failed and need reconsideration.