Skip Page Banner  
Skip Navigation

Backlash Against ‘Guidance as Rulemaking' Leads to Actions in Federal Court, Congress

Friday, July 15, 2011

The Environmental Protection Agency was dealt a policymaking setback July 1, when a federal appeals court struck down guidance outlining alternatives to a penalty program under the Clean Air Act for areas in violation of the air quality standards for ozone.

It was a stinging rebuke for the agency, with the U.S. Court of Appeals for the District of Columbia Circuit declaring that EPA overstepped its authority and essentially issued a regulation under the guise of nonbinding guidance.

The decision comes as the Obama administration faces a backlash from industry, Republicans in Congress, and state regulators over what they say is its pursuit of policy initiatives through guidance in lieu of rulemaking. Critics are challenging a practice—particularly on the part of EPA and to a lesser degree the Interior Department—they see as establishing new mandates without proper notice and comment.

The Clean Air Act document aside, EPA in the past 14 months has issued guidance to curb the impact of surface coal mining on water quality, to clarify which waters merit protection under the Clean Water Act, and to outline the best available technologies to curb greenhouse gases.

Interior, meanwhile, issued two guidance documents in June 2010 in the wake of the explosion at the Deepwater Horizon drilling rig in the Gulf of Mexico that required oil and gas companies to implement safety and environmental measures for drilling operations.

‘Poster Child' for Regulatory Overreach

EPA's actions have drawn the wrath of House Republicans. Appropriations Committee Chairman Hal Rogers (R-Ky.), speaking at a July 6 markup of the EPA appropriations bill for fiscal year 2012, said the agency has been “running roughshod” over every sector of the U.S. economy.

“This agency is the poster child for this Administration's widespread regulatory overreach, having vastly overstepped the authority granted by this Congress,” Rogers said.

Guidance, as defined by the Administrative Procedure Act, is a document that clarifies how an agency and its delegated state permitting agencies will interpret a law, such as the Clean Water Act or the Surface Mining Control and Reclamation Act, or it conveys administrative procedures to its various offices. A rule, unlike guidance, is a legally binding document that is subject to notice and comment.

Authorities on legal issues interviewed by BNA say the federal government, particularly EPA, has always used both regulatory guidance and rulemaking. Some say the Obama administration generally has been more forceful in issuing rules and enforcing environmental laws, but not everyone agrees this administration is using guidance more than others have.

Kevin Holewinski, a Clean Air Act attorney in the Washington, D.C., office of Jones Day, said this administration is not going beyond the tactics used by its predecessor, the George W. Bush administration, although it is testing the limits. “EPA has been pressing the envelope about what the law ought to mean, using the rulemaking process and guidance process, as its immediate predecessor [did],” he said.

If there is a difference between this administration and previous ones, some observers say, it is in the broad impact of some of the recent guidance documents.

Two Clean Water Act guidance documents in particular have come under intense scrutiny from Republicans in Congress.

The first guidance sets a water pollution standard based on conductivity and directs state and local permitting agencies to reject dredge-and-fill permits for surface coal mining operations in Appalachia that do not meet that standard. The second guidance, which is still in draft form, would expand federal jurisdiction over U.S. waters in light of the 2006 U.S. Supreme Court ruling in Rapanos v. United States.

EPA Eyes Wider Use of Benchmark

The mining guidance, based on the increased conductivity of water that results from the dissolved metals of mining waste in the water, has potentially broad implications.

Rep. Bob Gibbs (R-Ohio), chairman of the House Transportation and Infrastructure Subcommittee on Water Resources and Environment, bristled over the mining guidance at a subcommittee hearing in May.

The document, Gibbs said, “substantively changes how the Clean Water Act applies to surface mining, and [EPA] is using it as de facto law to unlawfully delay or kill Clean Water Act permits for surface mining operations in Appalachia.”

The Environmental Council of the States, the association that represents the heads of state environment departments, criticized the agency in testimony at the hearing for using the guidance when it was still considered an interim document that was not yet final.

“ECOS does not believe that EPA has ever attempted to require states to implement ‘interim guidance' until recently,” the state association told Gibbs's subcommittee.

The guidance is being used to measure dissolved solids in streams as a tool to gauge pollution downstream from Appalachian surface coal mines. Where EPA expects a mining operation to exceed a conductivity benchmark, the agency is blocking Clean Water Act Section 404 dredge-and-fill permits and Section 402 pollutant discharge permits.

Agency Sued Over Document

The National Mining Association and the states of West Virginia and Kentucky filed a lawsuit against EPA over that guidance, and at the same time over EPA's joint handling of coal mine permits with the U.S. Army Corps of Engineers and the Interior Department's Office of Surface Mining Reclamation and Enforcement.

In its motion to dismiss the lawsuit, EPA said the guidance should not be considered a rule, because it is not legally binding on federal or state regulators. It is something that EPA regional offices should consider while evaluating various information, the agency said. But in practice, according to industry and state officials, EPA has indeed treated the conductivity benchmark as a sufficient reason to block a dredge-and-fill permit.

In 2009, EPA identified 79 pending requests for dredge-and-fill permits that required enhanced review. Only a small percentage of the requests resulted in permits being issued, and state officials indicate the conductivity benchmark became the sticking point in many of the requests.

The court, in refusing EPA's request to dismiss the lawsuit, said the mining association “is likely to prevail on its claim that the EPA has exceeded its statutory authority” (National Mining Ass'n v. Jackson, D.D.C., No. 1:10-cv-1220 1/14/11; 42 ER 110, 1/21/11).

Kentucky entered a motion for summary judgment May 26, asking the court to find that the conductivity guidance usurped the state's role in policing water quality standards, and in doing so EPA violated the Clean Water Act and the Administrative Procedure Act. The state also asked that the court set aside EPA's rejection of numerous permits based on the guidance.

EPA Defends Use of Guidance

EPA remains adamant about its position on use of guidance and is particularly sensitive about allegations that it is using guidance in lieu of rulemaking.

“No, EPA does not pursue rulemaking through guidance documents,” the agency told BNA in an e-mail.

EPA did not address specific questions about its mining and Clean Water Act jurisdictional guidance documents because the coal mining guidance is being litigated in federal courts and the Clean Water Act jurisdiction guidance is still in draft form.

EPA did say that guidance documents are not subject to rulemaking notice-and-comment procedures and do not create legally binding requirements. Decisions are always based on applicable law and facts presented, the agency said.

“EPA often makes guidance documents publicly available to advise the public prospectively of the manner in which the agency plans to exercise its discretion. … It is important to note that guidance documents do not change applicable law or constrain EPA's discretion,” the agency said.

Courts Have Reviewed Guidance

EPA often has found itself in court over guidance documents.

BNA's review of court decisions going back more than two decades shows that EPA has always straddled a fine line in its use of guidance. The situation is no different under the Obama administration, according to several attorneys interviewed for this report.

Between 1979 and 2011, federal appellate and district courts have ruled in at least 14 cases brought by electric power companies, municipalities, sanitary sewer districts, cement kiln manufacturers, and individual landowners in which guidance was the central issue. The appellate courts have sided with EPA in six of nine decisions, while the district courts have favored EPA in three instances and the U.S. Coast Guard in one, and ruled against the U.S. Fish and Wildlife Service in one.

Air Act Guidance Vacated

In the most recent decision, the D.C. Circuit ruled July 1 that EPA violated the Administrative Procedure Act by using guidance to allow some states to avoid collecting fees from pollution sources in areas in severe or extreme nonattainment of the one-hour air quality standards for ozone and vacated the guidance. The fees are required under Section 185 of the Clean Air Act (Natural Resources Defense Council v. EPA, D.C. Cir., No. 10-1056, 7/1/11; 42 ER 1494, 7/8/11).

Ironically, while EPA in most cases has been criticized for overreaching with its guidance, in this case it was relaxing a Clean Air Act requirement after listening to complaints from industry that companies already were doing all they could to limit ozone-forming emissions and that the fees were unfair.

As Holewinski of Jones Day told BNA after the decision was handed down, “The irony of the ruling is that in this instance, industry was supportive of the EPA guidance, contending it was not binding in the literal sense. The court rejected that.”

Overall, EPA has received mixed review by the courts.

In July 2009, the D.C. Circuit ruled that the agency did not act arbitrarily or capriciously when it designated nonattainment areas for the annual national ambient air quality standard for fine particulates without going through a formal rulemaking process (Catawba County, N.C. v. EPA, 571 F.3d 20, 69 ERC 1033 (D.C. Cir. 2009); 40 ER 1621, 7/10/09).

That is because the court said Section 107(d) of the Clean Air Act, which outlines how EPA designates local air quality areas on the basis of compliance with national ambient air quality standards, does not require a public notice-and-comment period to make nonattainment designations.

Two years prior to that, the same appeals court ruled that EPA guidance issued with a rule regulating hazardous waste combustors under the Resource Conservation and Recovery Act was nonbinding because it “does not command, require, does not order, and does not dictate” (Cement Kiln Recycling Coalition v. EPA, 493 F.3d 207, 64 ERC 2025 (D.C. Cir. 2007)).

In that case, the court said the RCRA guidance was different from the Clean Air Act guidance in question in the 2000 Appalachian Power v. EPA case. The D.C. Circuit in Appalachian Power said the guidance directed states to require periodic monitoring of stationary air pollution sources seeking operating permits under Title V of the Clean Air Act, and therefore constituted a regulation requiring notice and comment (Appalachian Power Co. v. EPA, 208 F.3d 1015, 50 ERC 1449 (D.C. Cir. 2000)).

Drawing Line at New Requirements

Patrick Parenteau, a Vermont Law School professor specializing in environmental law, told BNA that courts want to grant EPA some latitude because they understand that agencies cannot do everything by rulemaking.

The courts have to decide “whether they should adopt the agency's interpretation or reject [it]. Should the agency be given discretion, or is the agency misinterpreting congressional intent?” he said.

“What you must ask when you come upon a guidance is, ‘Does it have an external effect, does it make people change their behavior, do things, spend money to install pollution control equipment, or does it organize a team or communicate to employees, set standards for performance?’ ” Parenteau said. “If the answer to the former is yes, then it's really more than a guidance; it has become a rule that has to go for notice and comment.”

Holewinski agrees. “A guidance is not really a guidance if it's not suggesting you do something, but requiring you must or you shall do something,” he said. “If that ‘shall' and ‘must' affects your operations and makes you do something new and different before you had the guidance, then in my view, you need to take a good long hard look at it.”

Holewinski and Parenteau agree that the mining guidance falls under the “must” and “shall” category, calling into question whether the document is nonbinding.

Parenteau, who has represented environmental groups in the past, said EPA crossed the “bright line” with the mining guidance because it states that if the conductivity levels in nearby streams exceed a specified limit, then the directive is not to agree to a permit.

“They put a bright line with that number. I would not be surprised if the ruling comes out in the favor of the plaintiffs,” Parenteau said.

Fight Over Clean Water Jurisdiction

In contrast to the mining guidance, Parenteau said, the draft Clean Water Act jurisdictional guidance that EPA and the Corps of Engineers issued in May is an interpretative guidance because it interprets the 2006 ruling by the Supreme Court in Rapanos v. United States (547 U.S. 715, 62 ERC 1481 (2006); 41 ER 2824, 12/17/10).

“It is not making new law,” Parenteau said. “EPA and the Corps are entitled to their opinion in the absence of clear authority, or holding, in this case.”

In Rapanos, the court split on defining a standard to establish jurisdiction, although Justice Anthony Kennedy's concurring opinion—which said a particular water must have a “significant nexus” to a navigable water—has been sporadically cited by federal appeals courts. Kennedy concurred in part and dissented in part with fellow Justice Antonin Scalia, whose plurality opinion said the Clean Water Act should apply to a stream or other body of water if it had “relatively continuous flow” and a “continuous surface connection” to navigable waters.

The Corps of Engineers and EPA chose to use Kennedy's concurring opinion and Scalia's plurality opinion as the bookends for interpreting the ruling in guidance documents issued in December 2007 and June 2008. Developers, builders, and environmental groups called the guidance insufficient, vague, and confusing and sought additional clarification as well as rulemaking.

EPA officials, notably Benjamin Grumbles, then-EPA assistant administrator for water, told BNA in January 2008 that EPA and the Corps of Engineers would modify the guidance based on comments they received on whether the guidance was clarifying jurisdictional questions (39 ER 173, 1/18/08).

The agencies subsequently proposed revisions to the guidance after field officers told them the earlier guidance was not working, and that is the draft that is now out for public comment.

Attempt at Rulemaking Backfired

Parenteau, as well as industry lawyers and representatives of the National Wildlife Federation, the American Farm Bureau Federation, and coal mining groups, have told BNA that EPA and the Corps of Engineers should have pursued a rulemaking. They all point to the opinions written by Scalia and Kennedy and Chief Justice John Roberts, who urged both agencies to proceed with a rulemaking.

But Parenteau noted that the agencies were burned earlier when they attempted a rulemaking. EPA and the Corps of Engineers under the Bush administration attempted to define “waters of the United States” through a rulemaking after the Supreme Court in 2001 ruled in the SWANCC case that Clean Water Act jurisdiction could not be extended to isolated wetlands just because migratory birds were seen in them (Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159, 51 ERC 1838).

That rulemaking effort “blew up in their face” because the states opposed it, Parenteau said. The states told the agencies you cannot change the way the Clean Water Act has been implemented for 30 years and exclude 90 percent of the waters.

“That is why the Bush administration opted for the 2003 SWANCC guidance,” Parenteau said.

EPA and Interior have also been accused of using court case settlements—especially in cases brought by environmental activists—as another strategy to avoid formal rulemakings. (See related story in this issue.)

Guidance Amid Disaster

EPA has drawn the most scrutiny when it comes to guidance, but it is not the only agency to use the tactic.

After explosions aboard the Deepwater Horizon drilling rig in the Gulf of Mexico started what would become the worst offshore oil spill in U.S. history, the Interior Department tried to deal with the crisis in part by issuing guidance on safety and environmental protection.

Those two documents were issued in June 2010 as notices to lessees while the oil continued to gush from BP Plc's ruptured well.

Apparently aware that it might have exceeded the limits of its authority in the notices, Interior announced an interim final rule Sept. 30 that codified much of what had been in the notices. Along with that, Interior issued a final rule on workplace safety for offshore operations that had been in development before the Deepwater Horizon disaster (41 ER 2205, 10/1/10).

Oil and gas industry executives, acknowledging the need for tighter regulations in the wake of an emergency, did not disapprove of the issuance of the notices to lessees, according to Lee Hunt, president of the International Association of Drilling Contractors. What troubled the executives was the hasty, ambiguous content of those notices and the lack of any opportunity for clarifications, he said.

“These things were all readdressed in the final drilling safety rule,” Hunt said, suggesting the industry was comfortable with the results.

OSHA Guidance Criticized

Outside of the context of an emergency, oil and gas companies have not been so tolerant of aggressive guidance.

Hunt cited the example of guidance issued in 2010 by the Occupational Safety and Health Administration that required workers to wear flame-resistant clothing while working at oil drilling sites.

The fire-retardant clothing probably would cost the industry up to $100 million a year and would be of dubious value, Hunt said. But OSHA did not seek public comment, nor did it submit to a review of the costs by the White House Office of Management and Budget, Hunt said. On the costs, he said, “they low-balled the estimate.”

The industry prepared to fight the guidance in court, but then “we just said the hell with it,” Hunt said. “We all just kind of said, ‘Let's just move on.' ”

David Michaels, assistant secretary of labor for occupational safety and health, defended the guidance in an appearance at the Oil and Gas OSHA Safety Conference in December, saying that flame-resistant clothing is “a proven supplemental protection against burn injuries” and can help save workers' lives.

Conclusion: Rules and Guidance Will Continue

As the disputes over guidance issued by federal agencies are sorted out in the courts and by Congress, it is safe to draw one conclusion: Both formal rulemaking and regulatory guidance will continue to play a role in environmental regulation.

Although formal rules are the backbone of the regulatory process, guidance serves a function in providing clarification and interpretation of laws.

The remaining question is: As court decisions come down and federal legislation unfolds in response to criticism of “guidance as rulemaking,” how much will the use of guidance by federal agencies be curtailed?

By Alan Kovski and Amena H. Saiyid 

The EPA guidance issued Jan. 5, 2010, on Clean Air Act Section 185 emissions fees is available at http://www.epa.gov/airquality/ozonepollution/pdfs/20100105185guidance.pdf. 

EPA's draft Clean Water Act guidance issued in May is available at http://water.epa.gov/lawsregs/guidance/wetlands/upload/wous_guidance_4-2011.pdf. 

EPA's surface coal mining guidance for Appalachia is available at http://water.epa.gov/lawsregs/guidance/wetlands/upload/2010_04_01_wetlands_guidance_appalachian_mtntop_mining_detailed.pdf.