Stemerick: The DC Circuit hands Trump EPA an early defeat

Stemerick

By Jeffrey Stemerick

The D.C. Circuit has had its first opportunity to weigh in on the Trump Environmental Protection Agency’s use of administrative authority to roll back nascent Obama-era rules. In Clean Air Council v. Pruitt, 862 F.3d 1 (D.C. Cir. 2017), the D.C. Circuit vacated EPA’s decision to stay the effective date of a rule establishing new source performance standards for fugitive methane emissions in the oil and gas industry. The decision casts a shadow on other Trump EPA efforts to use agency discretion to review and reconsider Obama-era rules.

To say that the Trump administration and the Obama administration have differing ideas over the proper scope and purpose of environmental regulations would be at best an understatement. During the last stretch of the Obama presidency, the Obama EPA proposed, finalized or implemented numerous rules. When Trump took office, these rules were in various states of finality. Some, like the Clean Power Plan, had been finalized but were wrapped up in litigation. Others, like the methane rules, were final with implementation deadlines already set. The Trump EPA quickly set to work reviewing the new rules.

The Trump administration won some early victories. For example, after Trump issued an executive order calling on the EPA to review the Clean Power Plan, Exec. Order No. 13,783, 82 Fed. Reg. 16,093, 16,095 (Mar. 31, 2017); see also 82 Fed. Reg. 16,329 (Apr. 4, 2017), EPA was successful in persuading the D.C. Circuit to stay the Clean Power Plan litigation while EPA reviews the rule (a process which will likely involve formal rulemaking). West Virginia v. Envtl. Prot. Agency, No. 15-1363 (Apr. 28, 2017). Because the United States Supreme Court had previously stayed the implementation of the Clean Power Plan pending review, West Virginia v. Envtl. Prot. Agency, 136 S. Ct. 1000, 1000 (2016), the D.C. Circuit’s stay allows EPA to review (and likely repeal) the Clean Power Plan without implementing it in the meantime.

The methane rule in Clean Air Council was differently situated. There was no judicial order staying the methane rule. The rule became final on Aug. 2, 2016, 81 Fed. Reg. 35,824, 35,824 (June 3, 2016) (to be codified at 40 C.F.R. pt. 60), and certain provisions of the rule were scheduled to become effective on June 3, 2017. 40 C.F.R. § 60.5397a(f). Industry groups sought reconsideration of the rule under Section 307(d)(7)(B) of the Clean Air Act, 42 U.S.C. § 7607(d)(7), and the EPA granted reconsideration. 82. Fed. Reg. 25,730, 25,732 (June 5, 2017). EPA also decided to use agency discretion to stay the effective date of the rule for 90 days to give it time to re-examine the rule. Id. at 25,732.

EPA’s decision to reconsider and stay the methane rule immediately drew a lawsuit from several environmental groups. At first blush, the challenge seemed like a long shot as the D.C. Circuit only has jurisdiction to review final agency action. Obviously, an EPA decision to grant a petition for reconsideration is not a final agency action, and the D.C. Circuit held the “EPA’s decision to grant reconsideration, which merely begins a process that could culminate in no change to the rule,” could not be reviewed by the court. Clean Air Council, 862 F.3d at 6. “The imposition of the stay however,” the per curiam opinion held, “was an entirely different matter.” Id. The court held that by suspending the compliance dates, EPA’s decision was “tantamount to amending or revoking the rule,” and was thus “final agency action” subject to judicial review. Id.

The court was not unanimous on this point. Judge Janice Brown dissented, reasoning that “hitting the pause button is the antithesis of ending the matter. The Court presumes a certain outcome from EPA’s reconsideration, one that a stay alone gives us no basis to presume.” Id. at 15 (Brown, J., dissenting). Judge Brown argued that by essentially holding that “an intermediate stay is the consummation of an agency’s decision-making we have conflated the agency preserving the status quo, i.e., forestalling the rule’s requirements in order to reconsider them, with the agency completing a course of action, i.e., ordering compliance.” Id. at 16.

In an 8-3 decision, the court denied rehearing en banc on Aug. 10. Any change in this jurisdictional ruling will now have to come from the United States Supreme Court.

After creatively dealing with the jurisdictional elephant in the room, the majority promptly ended EPA’s attempt to hold the rule in abeyance during reconsideration. The court found that the industry petitioners “had ample opportunity to comment on all four issues on which EPA granted reconsideration” and thus it found EPA’s stay was arbitrary, capricious and in excess of its statutory authority. Id. at 14.

Nonetheless, the court left a path open for EPA to stay the rule. On June 16, EPA proposed a formal rule staying the new methane regulations for two years. Oil and Natural Gas Sector Emission Standards for New, Reconstructed, and Modified Sources: Stay of Certain Requirements, 82 Fed. Reg. 27,645 (June 16, 2017). The court emphasized that its opinion was not intended to have any effect on EPA’s decision to reconsider the rule or the proposed rulemaking to stay the rule.

The D.C. Circuit’s opinion dealt a significant blow to the Trump administration’s efforts to swiftly pause and repeal pieces of the Obama environmental agenda. The holding is forcing EPA to use the slow and cumbersome formal rulemaking process rather than agency discretion to continue to review and repeal Obama-era rules. Administrative stays as a prelude to formal rules have been used repeatedly by the Trump EPA. For example, the effluent limitations guidelines were administratively stayed, 82 Fed. Reg. 19,005, 19,006 (Apr. 25, 2017), as EPA began the reconsideration process, although EPA has since proposed a formal rule staying its compliance deadlines. 82 Fed. Reg. 26,017, 26,018 (June 6, 2017). The effect of Clean Air Council is already being felt by EPA. For example, on June 6 — approximately one month before Clean Air Council — Administrator Scott Pruitt announced that EPA would extend time for compliance with the new ozone national ambient air quality standards for one year. 82 Fed. Reg. 29,246 (June 28, 2017). In early August — about a month after Clean Air Council — EPA withdrew the one-year extension. 82 Fed. Reg. 37,318 (Aug. 10, 2017).

Additionally, the holding on the threshold jurisdictional issue could also open the door to increased scrutiny of other interim agency actions. It remains to be seen how the D.C. Circuit will view formal EPA rulemaking aimed at repealing rules that the EPA had only recently determined were appropriate and necessary. Litigation is sure to follow any formal rule repealing a newly minted environmental regulation. Clean Air Council may signal a rough road ahead for future EPA reconsider and repeal efforts.•

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• Jeffrey D. Stemerick is an attorney at Taft Stettinius & Hollister and a member of the firm’s Environmental practice group. He can be reached at [email protected]. The opinions expressed are those of the author.