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

Monday Morning Regulatory Review – 4/10/17: Gorsuch to SCOTUS while SCOTUS Denies WOTUS Abeyance; Implementing Regulatory Reform Memorandum & Administrator Nominee; and Plain Snakes Not InterSTATE Shipments

Posted in Judicial Process, Regulatory Process

dawn over the capitol aocUnsurprising, the Senate confirmed a new Justice last Friday while the United States Supreme Court (SCOTUS) he is about to join continued adjudicating a minimal regulatory law docket, at least rejecting the notion that it should stay one case where the new Administration seeks to modify the underlying rule.  At the other end of Pennsylvania Avenue, the Office of Information and Regulatory Affairs (OIRA) issued new guidance on the latest regulatory reform Executive Order and the White House finally announced a nominee to run that critical operation.  Somewhere in the middle, the Court of Appeals affirmed a plain language judgment.

Gorsuch to SCOTUS:  The Senate confirmed Judge Neil M. Gorsuch to be the 113th Justice of the United States Supreme Court (SCOTUS) on Friday as expected and he is scheduled to take the oaths of office this morning.  Justice Gorsuch is likely to participate in the Court’s conference on Thursday and may even assume the bench next Monday.

►  Appreciating procedure suggests the need for a clear statement of how the Senate reached this confirmation:  the Senate did not change Rule XXII; a majority of the Senate overrode a ruling of the chair that after a failed cloture motion and reconsideration of that cloture motion, a supermajority of 60 was still required for cloture.  The substantive change altered a 2013 precedent for non-SCOTUS nominations to include SCOTUS nominations.  The minority will gain the benefit of this precedent when it becomes the majority.

No hearty regulatory cases remain on the SCOTUS docket this Term, although many interesting petitions for certiorari may provide an opportunity for the new Justice to illuminate his jurisprudence.

SCOTUS Denies WOTUS Abeyance:  Less noticed, SCOTUS last Monday denied, in a brief order with no explanation, the Solicitor General’s motion to hold briefing in abeyance in National Association of Manufacturers v. Department of Defense (DOD) pending agency reconsideration and further rulemaking.  SCOTUS granted certiorari to decide whether the United States Court of Appeals for the Sixth Circuit has jurisdiction over the substantive challenges to the Environmental Protection Agency (EPA) and DOD Army Corps of Engineers’ Clean Water Act:  Definition of “Waters of the United States” – known as the CWA and WOTUS.  SCOTUS did reset the briefing schedule slightly, but oral argument on the jurisdictional question remains likely next October or November and the case decided in early 2018.

►  The Sixth Circuit stayed the rule nationwide and has held briefing on the substantive issues in abeyance pending SCOTUS’s decision on jurisdiction.  SCOTUS’ denial of the motion to hold the jurisdictional issue briefing in abeyance motion adds only a small amount of pressure on the EPA and Engineers to propose and promulgate a revised WOTUS rule quickly.  The courts will deal with the revised rule when the agencies complete it as the then-current and applicable law, consistent with the state of litigation at that time.

Implementing Regulatory Reform Memorandum:  The current acting Administrator of the Office of Management and Budget (OMB)’s OIRA issued an implementation memorandum to executive agencies, Implementing Executive Order 13771, Titled “Reducing Regulation and Controlling Regulatory Costs, on April 5, 2017.  The memorandum provides guidance to agencies on implementing Executive Order 13771, § 2, regulatory requirements of the 2-for-1 rescission policy, the FY2017 net zero regulatory budgeting, and the zero-incremental cost.  The entire memorandum is worth reading, but two points are critical from a “legal process” perspective (although the memorandum is not legally enforceable).

First, the memorandum clarifies critical definition “regulation” in Executive Order 13771 as the same as what was long suspected:  the guidance defines an “EO 13771 regulatory action,” as OMB will use that operative term with the agencies, as:  a “significant regulatory action as defined in Section 3(f) of [Executive Order 12866] that has been finalized and that imposes total costs greater than zero” or a “significant guidance document …. reviewed by OIRA under the procedures of EO 12866 that has been finalized and that imposes total costs greater than zero.”  The offsetting “EO 13771 deregulatory action” are even broader, and include informal or formal rulemaking under the Administrative Procedure Act (APA) and negotiated rulemaking under the Negotiated Rulemaking Act (NegReg) (which leads to a proposed rule); guidance and interpretative documents; some actions related to international regulatory cooperation (presumably harmonization that leads to reduced costs); and information collection requests that repeal or streamline recordkeeping, reporting, or disclosure requirements under the Paperwork Reduction Act (PRA).

►  The broader deregulatory actions that can be used to offset regulatory costs appear to include one of the greatest costs of all:  existing paperwork requirements that can be reduced through efficiency without altering the regulations that created the initial requirements, e.g. creating electronic filing for otherwise paper forms or eliminating redundant information elements across several forms by the creation of account numbers.  The bottom line appears to be that an agency does not actually need to find two promulgations for repeal to promulgate a new rule – it must offset with some broader action and reach net zero.  In any event, net zero is the goal.

Second, Executive Order 13771 defines regulations or rule to exclude: “regulations issued with respect to a military, national security, or foreign affairs function.”  The language is almost the familiar exemption from the APA process for “military and foreign affairs functions,” but not quite.  OMB’s guidance fills out the new “national security function” of the United States for purposes of the Executive Order’s management to include regulatory actions for which a “benefit-cost analysis demonstrates that the regulation is anticipated to improve national security as its primary direct benefit” AND legislative rules that the agency and OIRA agree qualify under an “impracticable, unnecessary, or contrary to the public interest” “good cause” exception to advance notice and an opportunity for public comment before promulgation OR that the agency and OIRA agree that “applying the requirements of EO 13771 to the regulation would be impracticable or contrary to public interest.”  The guidance mixes some APA notions, and those notions have existing meaning.

►  The broad “military or foreign affairs function” exemption form rulemaking requirements has been interpreted by the courts, although agencies frequently fail to appreciate that precedent.  “Military and foreign affairs function” is not shorthand for the DOD and the Department of State (DOS) – the functions apply more broadly than the authority of these two organizations and both organizations perform many functions that do not fall within the exemption definition in the APA.

Borrowing the APA concepts should also mean borrowing the judicial precedent interpreting those concepts.  The courts “have repeatedly made clear that the good cause exception ‘is to be narrowly construed and only reluctantly countenanced.’”  To overgeneralize, “impracticable” means an emergency not of the agency’s creation; “unnecessary” means exactly that; and “contrary to the public interest” tends to mean that delay would have substantial adverse consequences to the United States, particularly evasion of critical requirements, not that the rule is a good idea.  Excepting “national security” from the Executive Order requirements does not, of course, create a “national security” exception to the notice and comment requirements of the APA, despite many agency desires for such freedom.  There is no “national security” exception in the APA.  OMB’s guidance may borrow concepts from the APA, and has done so in an interesting way, but neither the Executive Order nor OMB can create new law.

The memorandum provides much more detail on application, accounting, and process issues, even to the point of how OMB currently views accounting for judicial vacatur or remand without vacatur of past and current Administration regulations.  Although only a first level guidance – and it will be followed by more guidance as OIRA and the agencies discuss, negotiate, and argue – this memorandum reflects detailed analysis typical from OIRA.

Implementing Regulatory Reform Administrator Nominee:  The White House announced that the President of the United States (POTUS) had / would nominate Neomi Rao, Associate Professor of Law and Director of the Center for the Study of the Administrative State at George at the Antonin Scalia Law School of George Mason University to be Administrator of OIRA.  The nomination is not yet filed in the Senate, which is in recess (except for pro forma sessions) until April 24.

►  The nomination is likely to become a highly contentious debate over the Administration’s regulatory priorities, including the Executive Order and memorandum discussed above.

Plain Snakes Not Interstate Shipments:  In United States Association of Reptile Keepers v. Zinke, the United States Court of Appeals for the District of Columbia Circuit last Friday affirming a district court preliminary injunction, narrowly construed a criminal statute with delegated regulatory authority, rejecting the Department of the Interior (DOI) interpretation in the preamble of an implementing regulation.  The Lacey Act prohibits “any shipment” of a species that DOI determines to be injurious to humans, wildlife, agriculture, horticulture, or forestry “between the continental United States, the District of Columbia, Hawaii, the Commonwealth of Puerto Rico, or any possession of the United States.”  Under the Lacey Act, DOI adopted regulations prohibiting the interstate shipment, in 2012 and 2015 final rules, of the reticulated python and green anaconda.  The D.C. Circuit panel details a textual analysis of the plain meaning of the Lacey Act and rejects the notion that the agency could expand the language quoted above to a more general interstate prohibition.  In particular, the panel dissects how the term “between” affects the structured list of elements.  Even beyond plain language and the problem of deference to regulatory interpretation of a criminal statute, where the court need not go, the court noted that DOI had originally taken the position that the Lacey Act list of jurisdictions was exclusive.

We therefore decline to conclude that Congress, by implication, altered the meaning of the shipment clause’s terms so as to criminalize the interstate shipment of every Lacey Act species. Rather, the clause continues to mean what it has meant since its enactment: it prohibits the shipment of injurious species between the listed jurisdictions, including to and from the continental United States, but it does not speak to shipments between the 49 continental States.

Accordingly, the court affirmed the district court’s judgment and held “as a matter of law that the government lacks authority under the shipment clause to prohibit shipments of injurious species between the continental States.”

►  The unanimous opinion is hardly surprising but provides a highly technical tour of some basic canons of construction without being overly technical.  Although likely to appear in many treatises on statutory construction and interpretation, the decision is quite narrow and affirms the basic tenet of administrative law that an agency may not go where the underlying statute does not.