A hodgepodge of actions occurred in regulatory practice last week, including a district court decision vacating part of an agency guidance and a court of appeals decision to hold in abeyance litigation on regulatory efficacy to avoid possible conflicts with a sister circuit. One agency published a final response to a remand that raises old questions about remand without vacatur while two other agencies released a draft final leviathan with a decades long implementation.
Tobacco Products Guidance Vacatur: The Department of Health and Human Services (HHS), Food and Drug Administration (FDA)’s continuing efforts to implement the Family Smoking Prevention and Tobacco Control Act (TCA) hit a small roadblock last week in Philip Morris USA, Inc. v. FDA. The United States District Court for the District of Columbia reviewed the FDA’s purported guidance to industry on when an application must be made under the TCA for a new product. The court’s findings – after concluding that the issues were ripe and FDA’s guidance was a final agency action – focused on visibility and quantity:
First, the court found that modification of an existing product’s label that renders the product label “distinct” from its predecessor does not create a “new tobacco product” under Congress’ clear intent in the TCA, and, therefore, granting no deference to the FDA, found the guidance inconsistent with the statute. The court vacated the label provisions of the guidance.
Second, the court found that a change in the quantity of an existing product created a “new tobacco product” requiring FDA approval. In this instance, the statute was permissive and FDA’s guidance was only its view – an interpretative rule, not a substantive rule or legislative rule. Thus, the rule did not offend the Administrative Procedure Act (APA) (and though the FDA did use notice and comment procedures for guidance).
The split decision required the court to determine whether the guidance was severable – and the court had no difficulty concluding that FDA would have adopted the quantity requirement without the label requirements. Thus the court vacated only the labeling requirement and let stand the remainder.
► The FDA likely provides more guidance to industry than any other agency, and its internal notice and comment procedures once formed a benchmark for agency guidance practice, but no more. This particular decision is likely to be appealed – perhaps by both parties – and provides a further opportunity for the United States Court of Appeals for the District of Columbia Circuit to clarify some difficult distinctions in regulatory practice.
Waters Abeyance: In response to the continuing litigation over the propriety of the Environmental Protection Agency (EPA) and Army Corps of Engineers Clean Water Act: Definition of Waters of the United States” (WOTUS), the United States Court of Appeals for the Eleventh Circuit decided to stay its hand in Georgia v. McCarthy pending resolution of the consolidated petitions for review in the Sixth Circuit. Recall (or just search “WOTUS”) that the Judicial Panel on Multidistrict Litigation (JPMDL) consolidated all timely petitions for petitions for review in the Sixth Circuit (which subsequently stayed the rule nationwide and affirmed that it possesses jurisdiction) and denied consolidation of the cases filed in the district courts. In one such case, the district court denied a preliminary injunction on the basis that the Clean Water Act (CWA) vested jurisdiction in the courts of appeal. That denial was appealed to the Eleventh Circuit, which last week decided to stay its hand until the Sixth Circuit acts on the consolidated petitions for review in Georgia v. McCarthy. As the court noted, with a nationwide stay in place, plaintiff / appellants suffer no harm from the court staying its hand.
► The order surprises no one at this late stage of proceedings – fora (forums?) have been fully shopped as allowed and the various courts now face the potential for conflicting decisions that they can avoid. While the Eleventh Circuit must ultimately decide this case, haste clearly makes waste, and a delayed decision may render the issues moot (which they are not now).
Swaps Remand Response: The Commodity Futures Trading Commission (CFTC) published its “final response” to another United States District Court for the District of Columbia remand order from Securities Industry and Financial Markets Association v. CFTC. The district court remanded without vacatur eight CFTC swaps-related rulemakings for the CFTC to respond to inadequacies in the CFTC’s Commodity Exchange Act (CEA) statutory economic analysis (or benefit / cost analysis) or the CFTC’s explanation of its consideration of benefits and costs. The remand directed the CFTC to address explicitly whether the benefits and costs the CFTC identified in the eight rulemaking preambles apply to activities outside the United States (i.e. extraterritorial application) and to address any differences that may exist between domestic and foreign application.
The CFTC published an initial response in March 2015 and solicited public comments on that response and several specific questions. In this final response, the CFTC not only responds to the remand and the public comments, but initially considers whether it should amend any of the regulations – and avers its continued interest in appropriate amendments. The CFTC concludes that “the remanded rules are legally sound, and the Commission will not propose changes in the context of the SIFMA v. CFTC remand order.”
► The CFTC appears to go out of its way to appear responsive, but the issue is two-fold: (1) whether the CFTC or any agency can fairly consider a remand after it has committed to a course of action and (2) whether the public and regulated parties should be required to comply with deficient regulations while an agency corrects its errors. As noted when SIFMA was first decided, the issue remains the legitimacy of remand without vacatur and the judicially created avoidance in Allied-Signal. So long as the courts avoid the APA’s specific requirements to “set aside” deficient agency regulations, the agencies will likely attempt to do the minimum necessary to pass muster because the risks of failure remain relatively low.
Medium and Heavy Duty Emissions: The EPA and the Department of Transportation (DOT) National Highway Traffic Safety Administration (NHTSA) released the draft Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles – Phase 2 final rule. The final rule requires a reduction in numerous pollutants under both DOT efficiency and EPA Clean Air Act (CAA) requirements applicable to the 2018 through 2027 model years. EPA and NHTSA argue this second-in-a-long-range rule would substantially reduce greenhouse gas (GHG) emissions and fuel consumption by as much as $260 billion in benefits to society and fuel cost savings to consumers over the lifecycle of affected vehicles, against $31 billion in costs (3% discount rate). The economic analysis in the 3-ream-single-spaced draft is detailed to a point of including the fuel taxes not collected on reduced gallonage from efficiency measures (a transfer). Within that analysis, the agencies suggest a social cost of carbon (SCC) value in the rule from $24 to $340 billion, but admit that the range of SCC values are based on several different discount rates because of assumptions sensitivity about that discount rate, and because no consensus exists on the appropriate rate to use in assignment of costs and benefits to different generations – and this rule assigns present generation costs and future generation benefits.
The final rule has not been submitted to the Federal Register and publication will be a slow process, not only because of the size of the document, but because of the detail of the regulations, including a number of formulas. The rule will become effective 60-days after that delayed publication date.
► Bear in mind that lifecycle benefits and costs of a model year 2027 vehicle is highly speculative and based on predictions of changes in a number of elements, such as vehicle weight. The values are likely to change in the future as the agencies’ predictions come true or do not. One predictable known only to the agencies may be NHTSA’s proposed answer to petitions for rulemaking to require speed limiters on heavy duty trucks – an issue expected to be tentatively answered this week. Future Congresses and Presidents will have a say.
The post Monday Morning Regulatory Review – 8/22/16: Tobacco Products Guidance Vacatur; Waters Abeyance; Swaps Remand Response & Medium and Heavy Duty Emissions appeared first on Federal Regulations Advisor.