A summer lull in regulatory practice provides two significant actions are worth noting.
The first major challenge to the Administration’s theoretical Social Cost of Carbon (SCC) came up short – as did a bevy of other challenges in a court of appeals. At the other end of the procedural spectrum, an agency publishes today a final rule that was dictated by Congressional enactment – but still suggests the need for an exception from advance notice and an opportunity for public comment and a regulatory analysis.
Energy, Coolers & Carbon: The United States Court of Appeals for the Seventh Circuit denied petition for review of the Department of Energy (DOE)’s 2014 energy efficiency standards and test procedures for commercial refrigeration equipment (CRE) in Zero Zone, Inc. v. Department of Energy, rejecting a broad based set of challenges to both rules. Recall that the energy conservation standards and test procedures grew out of the 1970s oil shortfalls and consequences, resulting, today, in a rolling evaluation and reevaluation to achieve maximum improvement in energy efficiency that is technologically feasible and economically justified. Those standards must address a number of issues and the issues regenerate from regulatory to litigatory, here applicable to CRE, perhaps the most visible of which are the grocery store’s meat, produce, beer and frozen-food coolers.
The court held that DOE provided an adequate notice and opportunity for public comment on DOE’s engineering studies, even though some data was provided after the beginning of the comment period, at least noting that some commenters actually commented upon that data. The court rejected a number of disputes over the meaning and weight of the evidence, finding that DOE’s decisions were not arbitrary and capricious.
On economic evaluations, the court focused on DOE’s “estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year,” known as the Social Cost of Carbon (SCC). The Administration’s theory of SCC damage avoidance as benefits currently stands at $36 per ton of avoided emissions, within a range of $11 to $105 / ton, acknowledging vast scientific uncertainty and economic uncertainty. At bottom, the court was not persuaded that DOE had adequately responded to critical public comments and DOE’s evaluation was within its statutory discretion and not arbitrary and capricious. Moreover, the court rejected petitioners’ argument that DOE failed to comply with the Regulatory Flexibility Act (RFA).
► At bottom, the court was unconvinced, but was also applying relatively low standards of agency compliance. DOE easily could have produced all of the relevant data at the beginning of the public comment period. DOE could easily have responded to the details of critical comments on SCC. The issue, however, is not best practice, but minimally required practice, and DOE survived that low test. This does not mean that any of these challenges are final – it may mean that more detailed argument needs to be made earlier in the process before the agency to facilitate a court’s more critical review.
Some commenters have overemphasized this decision – it does not save the universe. The arguments did not sway this panel of judges and likely need refinement (and probably paring). The government’s curse is that multiple decisions in its favor have less effect than a single order that vacates a regulation.
Crude Oil Trains Time: The Department of Transportation (DOT) Pipeline and Hazardous Material Safety Administration (PHMSA) today published a Hazardous Materials: FAST Act Requirements for Flammable Liquids and Rail Tank Cars final rule without advance notice and an opportunity for public comment. PHMSA originally published a final rule adopting new specifications for tank cars carrying crude oil and ethanol in unit trains and certain high risk areas in May 2015, but Congress intervened in December 2015, setting new implementation deadlines and altering the qualifying characteristics by product, although it made no changes in the technical, structural specifications for new and retrofitted tank cars.
Congress explicitly instructed DOT to remove or conform the implementation deadlines in the regulations to the statutory revisions “[i]mmediately after the date of enactment” – a process that took eight months. PHMSA argues that “good cause” exists under the Administrative Procedure Act (APA) for promulgating the final rule without advance notice and an opportunity for public comment because the statutory timing requirement renders notice and comment impracticable and because nearly all of the changes are self-executing, reducing PHMSA’s role to non-discretionary and ministerial.
► PHMSA appears to be both right and wrong on its interpretation. Congress left PHMSA no discretion, but that does not render notice and comment impracticable – it may render notice and comment irrelevant and the APA requirements inapplicable. The APA is a default statute, and recognizes in a construction-limiting clause that its requirements may be explicitly overridden. PHMSA may not have wished to be so blunt and the good cause argument cushions any potential litigation over the regulation by adding a layer of defensive argument (not just the statute, but the good cause finding). The eight-month delay undercuts impracticability as much as the self-executive nature of the statute undercuts the need for any regulation at all – PHMSA could have merely removed the conflicting provisions and relied on the self-executing compliance dates and discriminators in the statute alone.
PHMSA expends, however, considerable effort providing a benefit / cost analysis under the various administrative requirements of executive orders. The economically significant final rule was reviewed by the Office of Management and Budget (OMB) (in less than two months), but that very review undercuts the non-discretionary statutory implementation notion that the APA either does not apply, or that notice and comment were impracticable. The notion that OMB needed to review this rule might conflict with the notion long argued by the Internal Revenue Service (IRS) that OMB does not review tax regulations because the statutory implementation is either non-discretionary or only procedural. OMB might wish to publicly address the standard because this rule now raises more questions than it answers.
The post Monday Morning Regulatory Review – 8/15/16: Energy, Coolers & Carbon, and Crude Oil Trains Time appeared first on Federal Regulations Advisor.