Regulatory practice was illustrated by several specific actions in the past week, some of which have subtle implications. The United States Court of Appeals for the District of Columbia Circuit opined on the efficacy of the Environmental Protection Agency (EPA)’s 2012 air pollution regulation of electric generating units, but with several deep divisions. In the agencies, a topic close to your author’s palette arose in the intelligence scour that generates this blog: beer, and how it is regulated and by whom, in this case the Food and Drug Administration (FDA) proposed rules on animal feed. Additionally, the Internal Revenue Service (IRS) signaled a probable revised proposed rule on political activities by social welfare organizations, the EPA and the Army Corps of Engineers (Engineers) finally published the proposed definition of “waters of the United States” for clean water purposes, and the Federal Aviation Administration (FAA) extended the effective date of rules applicable to air ambulances because the industry could not comply within the original time limits.
EPA Electricity Generating Units: In addition to National Association of Manufactures v. SEC, reviewed previously, and Natural Resources Defense Council v. Environmental Protection Agency (EPA), to be reviewed in the near future, the D.C. Circuit denied a complex set of the petitions for review of the EPA’s current regulations of electric generating units in White Stallion Energy Center, LLC v. Environmental Protection Agency. White Stallion involved numerous State, industry, labor, and environmental challenges to EPA’s National Emission Standards for Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units, a massive Clean Air Act (CAA) 2012 “precursor” to the contemporary policy debate on new and existing coal-fired EGUs. In short, a majority of the court upheld the final rule against all challenges (including a dismissal of one litigant for lack of standing).
Judge Kavanaugh dissented from the majority opinion’s decision to uphold EPA’s exclusion of cost from its decisionmaking under the unique and specific statutory provision applicable only to hazardous air pollution (HAP) from electric utility steam generating units (EGUs) – that special provision requires EPA to regulate EGUs “if the Administrator finds such regulation is appropriate and necessary after considering the results of” a specific study required by the specific provision. This provision is distinct from the more general provisions of the CAA under which a unanimous United States Supreme Court (SCOTUS), in Whitman v. American Trucking Associations, “refused to find implicit in ambiguous sections of the CAA an authorization to consider costs that has elsewhere, and so often, been expressly granted.”
► The per curiam opinion and the dissent differ significantly on how to read the complex statutory provisions and the role of benefit / cost analysis. Like other CAA analyses, EPA provided a benefit / cost analysis to the Office of Management and Budget (OMB) as part of its review, but did not consider that analysis in its decision, and the costs here are significant: $9.6 billion per year. Moreover, Judge Kavanaugh dissents from the majority’s view of the standing doctrine “zone of interests” under the Administrative Procedure Act (APA) and the CAA, suggesting that the law in the D.C. Circuit is “in a state of disorder and needs to be cleaned up in the near future.”
Beer, Grain & Cattle: In a recent twist, beer brewers have raised the specter that the FDA’s proposed Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Food for Animals may force brewers to alter how they handle the byproduct of the brewing process. After grain is the mashed to extract sugars in brewing and lautered, the spent grain is often sold or given to farmers as livestock feed. The FDA Food Safety Modernization Act (FSMA) animal feed proposed rules might for the first time impose onerous drying, packaging, and sanitary requirements on distribution of those spend grains. In public comments, the brewers have asked the FDA to conduct a risk assessment of farmers’ use of spent brewers’ grain as feed. The FDA does not appear to believe its proposed rule goes that far, but revisions may be proposed, and the failure to conduct a risk assessment, or eschewing the application to brewers’ spent grain could subject a final rule to an arbitrary and capricious “rationality” attack. A recent post in the Food Safety News details the debate.
► The current FDA proposals, and possible revised proposals, raise a question of how much FDA should disclose the interagency review process. The proposed rule does not suggest how or to what extent the Department of Agriculture (DOA) was consulted about animal health, particularly when fed brewers’ spent grain and the cost of its replacement to farmers, and with the EPA on the disposal impact on waste disposal sites. While those intra-branch consultations might generally fall within a deliberative privilege, transparency about the consultations might save the FDA far greater problems. In this instance, FDA needs to provide further information.
Tax Exempt Organizations & Politics: IRS Commissioner John Koskinen, in an interview, advised USA Today that the IRS is likely to propose a revised Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities. The proposed rule has drawn more than 150,000 public comments from all sectors of the political spectrum. This may be a record for the IRS, but other agencies proposing contentious rules have received far more. The comments signaled a deep and abiding opposition to the proposed rule, and a revised proposed rule would be most welcome.
► The history of the tax exempt / social welfare / political organization rules shows that comments do make a difference, although in this case, politics plays a large hand. Having joined this issue, the IRS may need to propose revisions with increasing refinements. The development of political organizing has far outstripped the IRS regulations for tax exempt organizations and the IRS risks litigation on a bevy of constitutional, statutory, and regulatory issues no matter the content of the final rule. Caution is well warranted.
Waters of the United States: Normally, once a proposed rule or rule has been noted by this blog at the pre-publication release stage, further notion is not necessary, but here the Environmental Protection Agency (EPA) and Army Corps of Engineers (Engineers) Definition of “Waters of the United States” Under the Clean Water Act pose such a significant set of issues, that a new link to the proposed rule published today, and docket EPA–HQ–OW–2011–0880, is appropriate. Public comments are due July 11, 2014. Additionally, the Engineers and EPA noticed the availability of an existing Interpretive Rule Regarding Applicability of the Exemption from Permitting under Section 404(f)(1)(A) of the Clean Water Act to Certain Agricultural Conservation Practices that excepts certain agricultural practices under the DOA’s Natural Resources Conservation Service (NRCS) conservation practice standards that were designed and implemented to protect and enhance water quality, requesting public comment by June 5, 2012. The interpretive rule has not been published in the Federal Register.
► Regulated entities often question whether pre-existing guidance (which does have the force and effect of law) continues to be considered agency policy after an intervening proposed and final rule on the subject. In this instance, EPA is providing at least the temporary answer by requesting comments on the policy as it exists at the time the rule is proposed. Commenters should consider the idea of incorporating the guidance into provisions of the final rule as fair game – the contemporaneous publication of the notice of availability suggest that EPA has brought the idea of converting the guidance into the final rule within the logical outgrowth parameters of the proposed rule.
Helicopter Ambulances: The Federal Aviation Administration (FAA) extended the effective date of a number of provisions of the Extension of Effective Date for the Helicopter Air Ambulance, Commercial Helicopter, and Part 91 Helicopter Operations Final Rule for a year upon the realization that the industry needed more time to effectively comply. In the final rule, the FAA implemented new operational procedures and required additional equipment for helicopter air ambulance operations in response to an increase in fatal helicopter air ambulance accidents.
► It would not have served the FAA or the industry to impose a rule with which the industry could not comply – even a rule designed to increase the safety and health of patients and personnel engaged in emergency medical air transport. Publication of a rule is hardly the last step in the administrative process – counsel for regulated parties need to continue to advise the agency of rule impact problems.