Regulatory practice litigation highlights over the past two weeks include the latest round of applications to stay the Administration’s Clean Power Plan, another problematic rework of Medicare rules for hospitals, and a consent decree to propose superfund insurance 30 years after authorization. On the rulemaking front, the Small Business Administration (SBA) completed critical size standards adjustments, and the Administration proposed an information collection at the cusp of authority without a further rulemaking.
Petitions for Clean Power Stay: State, industry, and organizational filed at least five separate applications to stay the Environmental Protection Agency (EPA) Clean Power Plan rule with the Chief Justice of the United States, sitting as Circuit Justice for the United States Court of Appeals for the District of Columbia Circuit. The Chief Justice called for a response to the first petition, and the Solicitor General responded to them all. Not surprisingly, the debate over staying the rule focuses on what irreparable harm flows from the first required planning submission by the States in September 2016, and compliance dates that span more than a decade in the future. The industry argues that EPA’s own modeling projects that industry would close a significant number of power plants in 2016 under the rule. The D.C. Circuit previously denied a stay, but ordered expedited briefing and set argument for June, setting expectations that it will decide the merits of the petitions for review by late summer.
► An application for a stay of a regulation pending judicial review is not unusual, but at this level might be rare – the Solicitor General calls it “unprecedented,” suggesting that he could prove the negative. The real problem is the “harm” of imposing a planning process on States, the “special solicitude” granted States in standing analysis, and, ultimately, the unique relationship of States in “our Federalism.” Industry harms and interests may be more concrete but it is less clear that these result from the rule.
Unknown is whether the Chief Justice will refer the matter to the full United States Supreme Court (SCOTUS) or decide the matter alone. Part of the argument revolves on the probability that SCOTUS would ultimately grant certiorari (four votes) as a value for granting or denying a stay (five votes). The issue itself suggests a value in the Chief referring the application to the Justices.
Given the schedule already in place in the D.C. Circuit, speculation about SCOTUS action is just that – speculation. SCOTUS may not issue an order until its regular order schedule.
Rural Hospitals Shifts: In a case sure to upset more never settled expectations on Medicare funding, the United States Court of Appeals for the Second Circuit held that the Department of Health and Human Services (HHS) 2000 regulation barring certain hospital reclassifications violated the plain terms of the Medicare Act and, therefore, was invalid in Lawrence + Memorial Hospital v. HHS. Under the Medicare Act, a hospital’s classification as “rural” or “urban” may affect its reimbursement for medical services and access to certain medical programs. Applying for reclassification to maximize reimbursement was expected, and HHS even noted in the 2000 rule preamble that some hospitals might “take advantage” of multiple reclassifications by program. The rule, therefore, prohibited reclassifications for other programs once an urban hospital had been classified as rural for a specific reimbursement purpose. Lawrence sued, and when the case reached the Second Circuit, that court held that the text of the statute unambiguously – at Chevron Step 1 – supported the hospital’s position that HHS must review reclassification applications and cannot, by rule, bar the reclassification.
► As the court noted, the Third Circuit reached the same result last year. A hospital may challenge the application of the regulation to bar its application even 15 years after promulgation, and the invalidity at Chevron Step 1 should be “facial.” Nonetheless, applying any remedy after 15 years of implementation is not a simple task and required, at least in this case, a remand to the district court. HHS may not agree or acquiesce with a single circuit, but pressure mounts exponentially to comply with multiple adverse circuit decisions.
Superfund Insurance: In a different vein, the D.C. Circuit agreed to a consent motion and ordered the EPA to take several specific regulatory actions under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) in an opinion and order in In re: Idaho Conservation League. CERCLA directed EPA to promulgate financial assurance regulations requiring “that classes of facilities establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” Congress enacted CERCLA and the regulatory requirement in 1980, and petitioners sought several times to nudge EPA to respond, most recently seeking mandamus. The parties agreed, however, to a timetable requiring EPA to sign for publication in the Federal Register
- a notice of proposed rulemaking on financial assurance requirements in the hardrock mining industry by December 1, 2016;
- a notice of its final action on such regulations by December 1, 2017; and
- a determination whether it propose rules on financial assurance requirements in the (a) chemical manufacturing industry; (b) petroleum and coal products manufacturing industry; and (c) electric power generation, transmission, and distribution industry by December 1, 2016.
► The agreed upon schedule of administrative proceedings will now be enforceable as a court order, but that has some limitations. In each instance, the EPA has agreed to take a specific administrative step, but not in any way indicated the content of its decision. Indeed, only final action reflects a judicially reviewable process end. On the other hand, note the precision that EPA’s administrator must “sign for publication” the specified documents, making clear a hard decision point, whatever it may be. The court ordered additional dependent deadlines that will manage the process for almost nine years, perhaps several administrations, but the deadlines will always be subject to further motions practice and other interventions. One voiced concern has been the bankruptcy of owners of superfund sites and the need for insurance that straddles the bankruptcy, but questions of the interrelationship between any CERCLA regulations and the Bankruptcy Code have never been explored – or needed to be explored, until now, and EPA must.
Size Matters More: The SBA published size standard adjustments for manufacturing, wholesale and retail, and non-manufacturing, non-wholesale and non-retail classifications of the North American Industry Classification System (NAICS). SBA also published an inflation adjustment for receipts-based size standards. SBA’s comprehensive size standards review makes significant changes in eligibility for small business loans and other government programs, but also adjust the metric base for Regulatory Flexibility Act (RFA) initial and final regulatory flexibility analyses in rulemaking – increasing the small business base by approximately 1,650 businesses.
► The changes should increase the analytical demands for agencies because the increase the number of potentially entities categorized as small that are potentially affected by proposed and final rules. All other factors aside, the increase should result in more findings that a regulation potentially has a significant economic impact on a substantial number of small entities and, therefore, increased agency analysis of the economic impact of proposed regulations and agency consideration of regulatory alternatives that will achieve the agency’s goal while minimizing the burden on small entities. The SBA’s conclusion of this long and arduous process of updating the size standards brings the regulatory process closer to economic reality and, therefore, is welcome.
Pay Disclosure: The Equal Employment Opportunity Commission (EEOC) proposed to alter its Employer Information Report (EEO–1) information collection requirements for employers to include pay data – setting off a firestorm of misunderstanding and criticism. Putting aside the hype, the EEOC requested public comments under the first stage of the Paperwork Reduction Act (PRA) on a proposed amendment to the widely-submitted EEO-1 to (a) continue the current data collection, and (2) add data on employees’ W–2 pay and hours worked, categorized across 10 job categories and by 12 pay bands. The public comment process is the first step in submitting a request for approval of the collection to the Office of Management and Budget (OMB), which will also be the target of another round of public comments if and when EEOC submits a request for approval.
► The proposal is not a proposed rule, although it ties to and expands a prior Department of Labor (DOL) proposed rule applicable to federal contractors. The EEOC has pointedly asked several critical questions that will likely draw substantial and a substantial number of responses. At bottom, however, the proposed collection seems to assume a degree of industry data malleability or pliability. The agency seems to admit a lack of nexus between potential 120 cells of data and any form of unlawful discrimination.
The post Monday Morning Regulatory Review – 2/8/16: Petitions for Clean Power Stay; Rural Hospitals Shifts; Superfund Insurance; Size Matters More & Pay Disclosure appeared first on Federal Regulations Advisor.