Monday Morning Regulatory Review: Clean Power Plan Published, EPA Sued; And Ozone, Too; More

The Environmental Protection Agency (EPA) took center stage last week with the publication of the Clean Power Plan and the immediate litigation, but also with today’s publication of new ozone standards. Drawing less public attention, but equally important, a court demanded a schedule for long overdue airport screening regulations, a new advisory committee will consider comments on how to register drones, and an agency pushed for more private consideration of a preferred social conscience.

Clean Power Plan Published, EPA sued: The EPA published its Clean Power Plan – aka Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units – on Friday, October 23, and litigants filed a deracho of petitions for review (PFR) with the United States Court of Appeals for the District of Columbia Circuit.

The CPP sets emission guidelines for States to follow in developing Clean Air Act (CAA) plans to reduce greenhouse gas (GHG) emissions from existing fossil fuel-fired electric generating units (EGUs). In sum, the CPP requires States to reduce EGU-generated carbon dioxide (CO₂) as greenhouse gas emissions by 32% over the next 15 years. The CPP also effective reverses policy from the oil import embargo in 1973 that required substantial investment in coal technology. The rule becomes effective on December 22, 2015. The States’ initial submission deadline on September 6, 2016, and might be extended into 2018.

EPA took two other actions that must be considered in conjunction with the CPP. EPA also proposed a preemptive strike (a hanging sword) in a Federal plan.   In addition, EPA published its final Standards of Performance: Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources – Electric Utility Generating Units rule. This rule sets new source performance standards (NSPS) under the CAA for CO₂ for newly constructed, modified, and reconstructed fossil fuel-fired EGUs.

States, industry, and labor organizations immediately filed at least 17 petitions for review in the D.C. Circuit on the first day that the court had jurisdiction:

1. West Virginia, et al. – a 24 State coalition, D.C. Cir. No. 15-1363;
2. Oklahoma, D.C. Cir. No. 15-1364;
3. International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers, AFL-CIO, D.C. Cir. No. 15-1365;
4. Murray Energy Corp., D.C. Cir. No. 15-1366;
5. National Mining Association, D.C. Cir. No. 15-1367;
6. American Coalition for Clean Coal Electricity, D.C. Cir. No. 15-1368;
7. Utility Air Regulatory Group and American Public Power Association – and its members, D.C. Cir. No. 15-1370;
8. Alabama Power Company, Georgia Power Company, Gulf Power Company, and Mississippi Power Company, D.C. Cir. No. 15-1371;
9. CO₂ Task Force of the Florida Electric Power Coordinating Group, Inc., D.C. Cir. No. 15-1372;
10. Montana-Dakota Utilities Co, D.C. Cir. No. 15-1373;
11. Tri-State Generation and Transmission Association, Inc., D.C. Cir. No. 15-1374;
12. United Mine Workers of America, D.C. Cir. No. 15-1375;
13. National Rural Electric Cooperative Association and its member cooperatives, D.C. Cir. No. 15-1376;
14. Westar Energy, Inc., D.C. Cir. No. 15-1377;
15. NorthWestern Corporation, D.C. Cir. 15-1378;
16. North Dakota, D.C. Cir. No. 15-1380; and
17. Chamber of Commerce of the United States and 16 other national business organizations, D.C. Cir. No. 15-1382.

Some petitions may be difficult to find merely because PACER has not caught up with the filing storm.

Petitioners need not flesh out the issues presented until filing a court ordered docketing statement and initial brief. The various conclusory PFRs and memoranda in support of motions to stay the rule suggest that petitioners will argue that the rule:

• violates the United States Constitution by intruding on State sovereignty;
• violates the CAA by conflating different authorities or that the CAA prohibits the regulation;
• violates the Administrative Procedure Act (APA) by imposing requirements in the final rule that are not a logical outgrowth of the proposed rule; and / or
• violates the APA as arbitrary and capricious and an abuse of discretion for a host of specific faults.

Petitioners asked the court to stay the rule pending disposition of the litigation and while the stay / preliminary injunction bar is high, this consolidated case need only present one petitioner that meets the standard. Ultimately, petitioners ask the court to hold unlawful and set aside the rule.

The litigation is not entirely one-sided because a number of States and organizations have indicated that they will seek to intervene as respondents – supporting EPA. The division may be deep, but ultimately, expect the court to consolidate all of these cases, and any additional cases filed during the 60-days after publication of the rule.

► After several litigation false starts since EPA released the CPP and took 2½ months to publish it, the D.C. Circuit, the venue of CAA cases, may now consider substantive issues. The detail will now take months of administrative record review and briefing, and a decision is not likely for a year – and probably not during this Administration. The complexity of this litigation suggests the appropriateness of a stay pending final disposition – even more than the stayed Waters of the United States rule.

And Ozone, too: EPA published in today’s Federal Register its expected Review of the National Ambient Air Quality Standards for Ozone, which becomes effective in 60 days. The rule changes downward the national ambient air quality standards (NAAQS) for ozone (O₃) to 0.070 parts per million (ppm) or 70 parts per billion (ppb).

► EPA required only three weeks to publish the ozone rule, but that does not mean that it is any less important or less subject to litigation. The rule likely will be challenged, but that clock only began at the beginning of the day of publication. Here again, judicial review lies to the D.C. Circuit and that docket will again require a careful perusal.

TSA Mandamused on Body Scanners: In a short but unusual order, the D.C. Circuit on Friday ordered the Department of Homeland Security (DHS), within 30 days, to “submit a schedule for the expeditious issuance of a final rule within a reasonable time.” Long story short, the Transportation Security Administration (TSA) began using advanced imaging technology (AIT – the body image technology) instead of common magnetometers in secondary airport screening in 2007 and in primary screening in 2009. In 2011, the D.C. Circuit held, in Electronic Privacy Information Center v. DHS, that

• TSA failed to justify its declination of a petition to initiate notice and comment rulemaking under the APA before using AIT scanners for primary screening and
• the use of AIT “substantively affects the public to a degree sufficient to implicate the policy interests animating notice-and-comment rulemaking,” i.e. APA required a rulemaking.

The court declined to vacate the extant “rule” because doing so “would severely disrupt an essential security operation.” Almost two years later, TSA proposed a rule in March 2013. After waiting another two years, the Competitive Enterprise Institute sought mandamus to compel the agency to act in conformity with the court’s mandate. The Department of Justice (DOJ) noted in responding that the complained-of AIT system has already been superseded by the Automated Target Recognition (ATR) screening system that it does not produce the complained of image of the traveler’s body, but that transition was begun before the proposed rule. After waiting two months for that response to the mandamus petition, the court took less than a month to indicate that it had waited enough and demanded a schedule.

► Again a court confronts agency recalcitrance in responding to court orders, and, while the D.C. Circuit has shown much patience, its patience appears, in the short unpublished order, to be approaching its end. Disruptive as it may be, the court could order TSA to cease using any form of the AIT technology until a final rule becomes effective. Hard this may be, but four years is an Administration-worth of time to complete a “priority” regulation that should have been adopted six years ago.

Drone Registry Comments and Committee: In the midst of its consideration of a final rule regulating small unmanned aerial systems (sUAS = drones), the Department of Transportation (DOT)’s Federal Aviation Administration (FAA) chartered a new and short-term task force on how the FAA should create and operate a drone registry. The FAA requested public comments by November 6, 2015, but also noted that it would keep the docket open after that date and consider all comments received in developing the registration process, presumably until November 20, when the task force reports and expires.

The proposed rule would apply to drones the current registration requirements applicable to all aircraft and would require display of the registration markings. The FAA appears to have concluded that it needs a much simpler, efficient, electronic, and less-costly registration system for drones, but needs more advice and has reopened the comment process slightly.

► At first blush, the task force looks like a Federal Advisory Committee Act (FACA) advisory committee, but it is not. The charter established the task force under the Administrator’s unique statutory authority that exempt from FACA requirements, but the FAA must adhere to APA requirements in this instance because the task force activities affect a rulemaking. The FAA does utilize some of the FACA devices to manage these unique committees. Given the delicacy and scope of the possible final rule, the approach seems quite appropriate.

Labor Fiduciary Standards Interpretation: The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) today published an Interpretive Bulletin Relating to the Fiduciary Standard under ERISA in Considering Economically Targeted Investments. The interpretive rule reinterprets the application of the Employee Retirement Income Security Act of 1974 (ERISA) pension plan fiduciary rules to investments selected because of their perceived collateral economic or social benefits. These investments have been variously referred to as socially responsible investing; sustainable and responsible investing; environmental, social and governance (ESG) investing; impact investing; and economically targeted investing (ETI). DOL admits that no consistency exists and the concept is evolving, and uses ETI as a default terminology.

In 1994 (Clinton) DOL took the view in its first interpretive bulletin that ERISA does not prevent plan fiduciaries from investing plan assets in ETIs if the ETI has an expected rate of return that is commensurate with other investments with similar risk and other characteristics. In 2008 (Bush), DOL advised that fiduciaries may never subordinate the economic interests of the plan participants and beneficiaries to unrelated objectives. Now (Obama), DOL finds that the 2008 interpretation

unduly discouraged fiduciaries from considering ETIs and ESG factors. In particular, [DOL] is concerned that the 2008 guidance may be dissuading fiduciaries from (1) pursuing investment strategies that consider environmental, social, and governance factors, even where they are used solely to evaluate the economic benefits of investments and identify economically superior investments, and (2) investing in ETIs even where economically equivalent. Some fiduciaries believe the 2008 guidance sets a higher but unclear standard of compliance for fiduciaries when they are considering ESG factors or ETI investments.

The new interpretation tries to make clear that DOL believes that the fiduciary standards applicable to ETIs are no different from the standards applicable to plan investments generally, and DOL expects plan fiduciaries to apply the same standards.

This reinterpretation comes a month after the close of the public comment period on DOL’s contentious proposed Definition of the Term “Fiduciary”; Conflict of Interest Rule – Retirement Investment Advice. That rule if promulgated in final form would heighten the standard that investment advisors must apply in recommending plan investments.

► This “all other things being equal” interpretation might be better suited for inclusion in the substantive rule, except that DOL is taking advantage of the Mortgage Bankers Association v. Perez decision that an agency may flip-flop interpretations with each administration without the procedural and limited transparency notice and comment requirements of the APA. All other things, of course, can never be held equal – ceteris paribus is a fallacy. Here, DOL is attempting to encourage pension plans to conform to this Administration’s perception of a proper (i.e. politically correct) social conscience. As an interpretive rule, however, it remains subject to the same evanescence come the next Administration, if that Administration so chooses.

The post Monday Morning Regulatory Review – 10/26/15: Clean Power Plan Published, EPA sued; And Ozone, too; TSA Mandamused on Body Scanners; Drone Registry Comments and Committee; & Labor Fiduciary Standards Interpretation appeared first on Federal Regulations Advisor.