Federal courts reminded by agencies and litigators of lessons they should have previously learned last week, while agencies banked more fuel for future regulatory fires. The United States Court of Appeals for the District of Columbia Circuit reiterated that only final rules, not proposed rules, are subject to judicial review, and it also denied a motion to a stay of the recently promulgated internet as utility rules. Elsewhere in the same courthouse, the district court reiterated the requirement that agencies produce a complete administrative record of a rulemaking, not merely the documents that the agency believes sufficient. In the regulatory process, the Environmental Protection Agency (EPA) took the first step toward regulating aircraft engine emissions, while the Food and Drug Administration (FDA) transmitted economically significant food safety rules to interagency and executive review.
Image may be NSFW.
Clik here to view.
Final Rules, not Proposed: The D.C. Circuit reiterated a fundamental premise of judicial review in In Re Murray Energy Corp. last Friday: final rules, not mere proposed rules, are subject to judicial review under the Administrative Procedure Act (APA) and statutes that rely upon the APA, such as the Clean Air Act (CAA). On June 18, 2014, EPA proposed a rule to restrict carbon dioxide emissions from existing coal-fired and natural gas-fired power plants. Murray Energy and a legion of others (including States) petitioned for review and an extraordinary writ of prohibition under the All Writs Act to bar EPA from promulgating the rule because EPA lacked statutory authority to regulate existing power plants. The D.C. Circuit was unimpressed with the assertion of jurisdiction, rejecting several arguments for expedited, pre-final rule review and reiterating that final agency action was a prerequisite for judicial review of rulemaking.
While the litigation progressed, EPA contemplated the public comments and submitted, on June 1, 2015, a final rule to the Office of Management and Budget (OMB) – a final agency action when published that will soon enough be subject to judicial review.
► Statutory authority to regulate is often contentious and a clear statement of its statutory authority in a proposed rule serves well both the agency and the public, but agencies may often consider such “clarity” to be “off message” – of course the agency has authority to promulgate a rule or they would not have proposed it. In this instance, a shallow statement of authority in the proposed rule begs questions. EPA asserted only that the rule would be “consistent with the requirements of [the CAA] and the implementing regulations” and “EPA reasonably interprets the provisions identifying which air pollutants are covered under [the] CAA … to authorize the EPA to regulate CO2 from fossil fuel-fired EGUs.”
Unfortunately, the decision resulted in widespread but erroneous reporting as numerous news outlets suggested that the D.C. Circuit rejected a challenge to an EPA “rule” or that this decision was a “win” for the Administration’s program, overstating what was actually decided. The decision reaches no substance, and was actually less than a surprise, both predictable and predicted.
Open Internet Unstayed & Effective: At about the same time, the D.C. Circuit declined, in U.S. Telecom Association v. FCC, to stay the Federal Communications Commission (FCC) Protecting and Promoting the Open Internet, saying only that “Petitioners have not satisfied the stringent requirements for a stay pending court review” and citing the traditional test for a preliminary injunction in Winter v. NRDC. With the stay denied, the rule became effective on June 12, 2015, as scheduled. The court did open the door to expedited proceedings on the petition for review by ordering the parties to consult and propose a briefing schedule in the next two weeks.
► The brevity of the order is not surprising given that it is a denial – a more fulsome explanation would have been appropriate if the court granted a stay. All things considered, including the additional steps that the FCC would be required to take to enforce any of the proscriptions in the rule, the denial and possible expedited proceedings might suggest that the dispositive factor was a lack of showing immediate and irreparable harm.
Complete Agency Rulemaking Records: The United States District Court for the District of Columbia, in the long-running Lee Memorial Hospital v. Burwell, required Department of Health and Human Services (HHS) to complete the administrative record in a challenge to hospital payment rules under Medicare. In essence, a long list of hospitals, in a chain of litigation that has spanned years, claimed that HHS underpaid them for Medicare services provided during specific fiscal years, knowing that HHS’s regulations and underlying produced the wrong results, and continued to underpay them for years nonetheless. The hospitals alleged that the regulations governing outlier payments and the fixed loss thresholds led to incorrect decisions on their outlier payment amounts for certain years, including 2003 amendments to outlier payment rules, arguing that the amendments form the basis for how the fixed loss thresholds were set in the applicable 2008-2011 payment years. After HHS filed the administrative record, plaintiffs moved to compel completion of that record with additional documentation. The court ordered HHS to include in the administrative record,
- the draft interim final rule (IFR) from the 2003 amendments to the payment regulations that was part of the same rulemaking;
- the Impact File for the 2003 Rulemaking;
- the formulas used to calculate the fixed loss thresholds;
- all instructions applied by HHS to exclude data from its analysis in conducting data trims; and
- the formulas used to calculate estimated outlier payments, made during previous fiscal years, that HHS considered in determining the fixed loss thresholds for the relevant years.
The court did not, consistent with some prior precedent, require HHS to include in the administrative record the raw data that could permit the plaintiffs to replicate (or challenge) the actual calculations.
► Lee Memorial Hospital, and the other cases in this funding formula saga, may itself be an outlier, a highly technical application of the standard administrative record precedent over a cumulation of interrelated, interdependent, and overlapping rules. Agencies and litigators can learn here, however, that the “whole administrative record” required for APA judicial review consists of all documents and materials directly or indirectly considered by agency decision-makers (both final and structurally through the hierarchy), including contrary evidence – nothing more nor less. The administrative record (whether in rulemaking, adjudication, or both) is not a product of the agency’s discretion, it is a mandatory compilation of documents as defined by court precedent. In this instance, the court may have been limited by the abuse of discretion standard of review and thus declined to require raw data, but an arbitrary and capricious standard of review may lead to a different result.
As noted previously in an Administrative Conference of the United States (ACUS) recommendation and report, agencies need to be inclusive in compiling an administrative record. To go even further, the presumption of regularity should not save an agency from more critical review when the agency fails once to provide a complete administrative record, and while the parties may trim the information to ease the court’s review, the agency must first produce the whole record to the parties for that parsing.
Aircraft Engine Endangerment: The EPA released a long-awaited, and judicially compelled, response to a 2007 petition under the CAA for an “endangerment finding” that aircraft engines producing greenhouse gases (GHG) cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. The Proposed Finding that Greenhouse Gas Emissions from Aircraft Cause or Contribute to Air Pollution that May Reasonably Be Anticipated to Endanger Public Health and Welfare and Advance Notice of Proposed Rulemaking (ANPRM) sets in motion an extended rulemaking process to regulate emissions from aircraft engines, but is subject to numerous limitations and may result in a regulation conforming with pending International Civil Aviation Organization (ICAO) efforts to reduce greenhouse gas emissions:
The Administrator proposes to find that GHG emissions from engines used in U.S. subsonic jet aircraft with a maximum takeoff mass (MTOM) [known in United States aviation circles as maximum takeoff weight (MTOW)] greater than 5,700 kilograms [12,566 pounds, which probably means 12,500 pounds] and in subsonic propeller driven (e.g., turboprop) aircraft with a MTOM greater than 8,618 kilograms [19,000 pounds], contribute to the GHG air pollution that endangers public health and welfare.
A great deal has been said about the importance of this first-level proposed finding, but EPA must still propose a rule, finalize that rule, and the Department of Transportation (DOT)’s Federal Aviation Administration (FAA) must issue regulations to ensure compliance with those standards when issuing certificates under its management of aircraft specifications for aircraft within the United States. EPA will accept public comments on the ANPRM for 60 days following publication in the Federal Register.
► EPA is unlikely to take significant steps ahead of the ICAO adoption of international standards, if for no other reason as the potential segregation of aircraft into ever more dysfunctional categories for international routing. While the issue has been percolating for at least eight years, and a district court found that while the CAA generally EPA broad discretion in determining what standards to promulgate, the CAA also imposed a nondiscretionary duty on the EPA to make a finding on the issue of endangerment from aircraft GHG emissions in 2011. EPA’s compliance only sets in motion a host of questions, such as whether new standards will apply to in-service aircraft and engines (imposing vast retrofitting requirements and costs) or new certification designs (future systems) – and given the enormous cost distinctions and timeframes involved, this decision could be decisive in rule acceptance or litigation.
Food Safety Returns: The HHS’s FDA submitted three economically significant final rules to OMB for executive and interagency review:
- Current Good Manufacturing and Hazard Analysis, and Risk-Based Preventive Controls for Human Food,
- Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Food for Animals, and
- Foreign Supplier Verification Program.
FDA’s compliance with statutory deadlines for promulgating some Food Safety Modernization Act (FSMA) rules consumed significant process litigation and negotiation, and these final rules may not enlighten on whether that process litigation impacted the substantive decisions. When interagency and executive review is completed and the rules are published only one process will end.
► Transmitting the final rules to OMB marks only the beginning of the end of the regulatory process, however, with a few additional steps yet to measure. Publication of the final rules will likely mark the beginning of litigation challenging the substance of the FSMA rules as arbitrary and capricious when compared with their expected economic burdens.
The post Monday Morning Regulatory Review – 6/15/15: Final Rules, not Proposed; Open Internet Unstayed & Effective; Complete Agency Rulemaking Records; Aircraft Engine Endangerment; & Food Safety Returns appeared first on Federal Regulations Advisor.